Weather Index Insurance and Shock Coping : Evidence from Mexico's CADENA Program

Weather risk and incomplete insurance markets are significant contributors to poverty for rural households in developing countries. Weather index insurance has emerged as a possible tool for overcoming these challenges. This paper provides evidence...

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Main Authors:	de Janvry, Alain, Ramirez Ritchie, Elizabeth, Sadoulet, Elisabeth
Format:	Working Paper
Language:	English en_US
Published:	World Bank, Washington, DC 2016
Subjects:	HOUSEHOLD INCOMES RISKS IMPACT OF HURRICANES LANDHOLDINGS GOVERNMENT EXPENDITURES PRODUCTION RISK MANAGEMENT STRATEGIES PUBLIC ECONOMICS INCOME POVERTY INCOME CROPLAND INTEREST RATE OF RETURN AGRICULTURAL PRODUCTION EXCHANGE REMITTANCE INFORMATION PROGRAMS DEVELOPING COUNTRIES POLITICAL ECONOMY WELFARE INSURANCE POLICIES EFFECTS AGRICULTURAL ECONOMICS LOSS RATIO WEATHER INSURANCE RURAL POPULATION INTERNATIONAL BANK HURRICANES ECONOMIC ANALYSIS POVERTY REDUCTION RISK AVERSE INDIVIDUALS CROP INSURANCE RURAL POPULATIONS UNINTENDED CONSEQUENCES PER CAPITA INCOME RURAL HOUSEHOLDS CROWDING OUT COSTS OF INSURANCE INSURANCE MARKETS PREMIUM PAYMENTS TRANSFERS FINANCIAL INSTITUTIONS MARKETS HOUSEHOLD INCOME ORGANIZATIONS INTERNATIONAL DEVELOPMENT RETURN FARMERS RISK SHARING CASH TRANSFERS INSURANCE COVERAGE INSURANCE POLICY LIVESTOCK ASSETS FINANCE COVARIATE SHOCKS INVESTMENT DECISIONS EXPENDITURE TRANSACTIONS CONSUMPTION CREDIT CONSTRAINTS CLIMATE CHANGE POLICIES DROUGHT RUNNING WATER CREDIT CONSTRAINT FUTURE VALUE LOSSES CREDIT DISASTER RISK FINANCING CLIMATE DEMAND MARKET CONSTRAINTS MICROINSURANCE EXPENDITURES AGRICULTURAL LAND SMALLHOLDER FARMERS RURAL MARKET RISK TRANSFER ECONOMICS POLICY PRIVATE TRANSFERS MANAGEMENT INSURANCE COSTS INSURANCE INSURANCE PREMIUMS LOSS CONSUMPTION SMOOTHING THEORY INSURANCE PAYMENTS DURABLE INVESTMENT ECONOMIC IMPACTS RISK INDEMNITY RURAL AREAS POVERTY CREDIT MARKET CONSTRAINTS TRANSACTIONS COSTS RISK TAKING INFORMAL INSURANCE POOR LIVING INVESTMENTS RISK MANAGEMENT HOUSEHOLD EXPENDITURES POOR INDEMNITY PAYMENTS REMITTANCES OUTCOMES BASIS RISK COVERAGE BENEFITS CREDIT MARKET PREMIUMS
Online Access:	http://documents.worldbank.org/curated/en/2016/06/26510002/weather-index-insurance-shock-coping-evidence-mexicos-cadena-program http://hdl.handle.net/10986/24632

id	okr-10986-24632
recordtype	oai_dc
spelling	okr-10986-246322021-04-23T14:04:23Z Weather Index Insurance and Shock Coping : Evidence from Mexico's CADENA Program de Janvry, Alain Ramirez Ritchie, Elizabeth Sadoulet, Elisabeth HOUSEHOLD INCOMES RISKS IMPACT OF HURRICANES LANDHOLDINGS GOVERNMENT EXPENDITURES PRODUCTION RISK MANAGEMENT STRATEGIES PUBLIC ECONOMICS INCOME POVERTY INCOME CROPLAND INTEREST RATE OF RETURN AGRICULTURAL PRODUCTION EXCHANGE REMITTANCE INFORMATION PROGRAMS DEVELOPING COUNTRIES POLITICAL ECONOMY WELFARE INSURANCE POLICIES EFFECTS AGRICULTURAL ECONOMICS LOSS RATIO WEATHER INSURANCE RURAL POPULATION INTERNATIONAL BANK HURRICANES ECONOMIC ANALYSIS POVERTY REDUCTION RISK AVERSE INDIVIDUALS CROP INSURANCE RURAL POPULATIONS UNINTENDED CONSEQUENCES PER CAPITA INCOME RURAL HOUSEHOLDS CROWDING OUT COSTS OF INSURANCE INSURANCE MARKETS PREMIUM PAYMENTS TRANSFERS FINANCIAL INSTITUTIONS MARKETS HOUSEHOLD INCOME ORGANIZATIONS INTERNATIONAL DEVELOPMENT RETURN FARMERS RISK SHARING CASH TRANSFERS INSURANCE COVERAGE INSURANCE POLICY LIVESTOCK ASSETS FINANCE COVARIATE SHOCKS INVESTMENT DECISIONS EXPENDITURE TRANSACTIONS CONSUMPTION CREDIT CONSTRAINTS CLIMATE CHANGE POLICIES DROUGHT RUNNING WATER CREDIT CONSTRAINT FUTURE VALUE LOSSES CREDIT DISASTER RISK FINANCING CLIMATE DEMAND MARKET CONSTRAINTS MICROINSURANCE EXPENDITURES AGRICULTURAL LAND SMALLHOLDER FARMERS RURAL MARKET RISK TRANSFER ECONOMICS POLICY PRIVATE TRANSFERS MANAGEMENT INSURANCE COSTS INSURANCE INSURANCE PREMIUMS LOSS CONSUMPTION SMOOTHING THEORY INSURANCE PAYMENTS DURABLE INVESTMENT ECONOMIC IMPACTS RISK INDEMNITY RURAL AREAS POVERTY CREDIT MARKET CONSTRAINTS TRANSACTIONS COSTS RISK TAKING INFORMAL INSURANCE POOR LIVING INVESTMENTS RISK MANAGEMENT HOUSEHOLD EXPENDITURES POOR INDEMNITY PAYMENTS REMITTANCES OUTCOMES BASIS RISK COVERAGE BENEFITS CREDIT MARKET PREMIUMS Weather risk and incomplete insurance markets are significant contributors to poverty for rural households in developing countries. Weather index insurance has emerged as a possible tool for overcoming these challenges. This paper provides evidence on the impact of weather index insurance from a pioneering, large-scale insurance program in Mexico. The focus of this analysis is on the ex-post effects of insurance payments. A regression discontinuity design provides find evidence that payments from weather index insurance allow farmers to cultivate a larger land area in the season following a weather shock. Households in municipalities receiving payment also appear to have larger per capita expenditures and income in the subsequent year, although there is suggestive evidence that some of this increase is offset by a decrease in remittances. While the cost of insurance appears to be high relative to the payouts, the benefits exceed the costs for a substantial range of outcomes. 2016-07-07T20:53:34Z 2016-07-07T20:53:34Z 2016-06 Working Paper http://documents.worldbank.org/curated/en/2016/06/26510002/weather-index-insurance-shock-coping-evidence-mexicos-cadena-program http://hdl.handle.net/10986/24632 English en_US Policy Research Working Paper;No. 7715 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper Latin America & Caribbean Mexico
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English en_US
topic	HOUSEHOLD INCOMES RISKS IMPACT OF HURRICANES LANDHOLDINGS GOVERNMENT EXPENDITURES PRODUCTION RISK MANAGEMENT STRATEGIES PUBLIC ECONOMICS INCOME POVERTY INCOME CROPLAND INTEREST RATE OF RETURN AGRICULTURAL PRODUCTION EXCHANGE REMITTANCE INFORMATION PROGRAMS DEVELOPING COUNTRIES POLITICAL ECONOMY WELFARE INSURANCE POLICIES EFFECTS AGRICULTURAL ECONOMICS LOSS RATIO WEATHER INSURANCE RURAL POPULATION INTERNATIONAL BANK HURRICANES ECONOMIC ANALYSIS POVERTY REDUCTION RISK AVERSE INDIVIDUALS CROP INSURANCE RURAL POPULATIONS UNINTENDED CONSEQUENCES PER CAPITA INCOME RURAL HOUSEHOLDS CROWDING OUT COSTS OF INSURANCE INSURANCE MARKETS PREMIUM PAYMENTS TRANSFERS FINANCIAL INSTITUTIONS MARKETS HOUSEHOLD INCOME ORGANIZATIONS INTERNATIONAL DEVELOPMENT RETURN FARMERS RISK SHARING CASH TRANSFERS INSURANCE COVERAGE INSURANCE POLICY LIVESTOCK ASSETS FINANCE COVARIATE SHOCKS INVESTMENT DECISIONS EXPENDITURE TRANSACTIONS CONSUMPTION CREDIT CONSTRAINTS CLIMATE CHANGE POLICIES DROUGHT RUNNING WATER CREDIT CONSTRAINT FUTURE VALUE LOSSES CREDIT DISASTER RISK FINANCING CLIMATE DEMAND MARKET CONSTRAINTS MICROINSURANCE EXPENDITURES AGRICULTURAL LAND SMALLHOLDER FARMERS RURAL MARKET RISK TRANSFER ECONOMICS POLICY PRIVATE TRANSFERS MANAGEMENT INSURANCE COSTS INSURANCE INSURANCE PREMIUMS LOSS CONSUMPTION SMOOTHING THEORY INSURANCE PAYMENTS DURABLE INVESTMENT ECONOMIC IMPACTS RISK INDEMNITY RURAL AREAS POVERTY CREDIT MARKET CONSTRAINTS TRANSACTIONS COSTS RISK TAKING INFORMAL INSURANCE POOR LIVING INVESTMENTS RISK MANAGEMENT HOUSEHOLD EXPENDITURES POOR INDEMNITY PAYMENTS REMITTANCES OUTCOMES BASIS RISK COVERAGE BENEFITS CREDIT MARKET PREMIUMS
spellingShingle	HOUSEHOLD INCOMES RISKS IMPACT OF HURRICANES LANDHOLDINGS GOVERNMENT EXPENDITURES PRODUCTION RISK MANAGEMENT STRATEGIES PUBLIC ECONOMICS INCOME POVERTY INCOME CROPLAND INTEREST RATE OF RETURN AGRICULTURAL PRODUCTION EXCHANGE REMITTANCE INFORMATION PROGRAMS DEVELOPING COUNTRIES POLITICAL ECONOMY WELFARE INSURANCE POLICIES EFFECTS AGRICULTURAL ECONOMICS LOSS RATIO WEATHER INSURANCE RURAL POPULATION INTERNATIONAL BANK HURRICANES ECONOMIC ANALYSIS POVERTY REDUCTION RISK AVERSE INDIVIDUALS CROP INSURANCE RURAL POPULATIONS UNINTENDED CONSEQUENCES PER CAPITA INCOME RURAL HOUSEHOLDS CROWDING OUT COSTS OF INSURANCE INSURANCE MARKETS PREMIUM PAYMENTS TRANSFERS FINANCIAL INSTITUTIONS MARKETS HOUSEHOLD INCOME ORGANIZATIONS INTERNATIONAL DEVELOPMENT RETURN FARMERS RISK SHARING CASH TRANSFERS INSURANCE COVERAGE INSURANCE POLICY LIVESTOCK ASSETS FINANCE COVARIATE SHOCKS INVESTMENT DECISIONS EXPENDITURE TRANSACTIONS CONSUMPTION CREDIT CONSTRAINTS CLIMATE CHANGE POLICIES DROUGHT RUNNING WATER CREDIT CONSTRAINT FUTURE VALUE LOSSES CREDIT DISASTER RISK FINANCING CLIMATE DEMAND MARKET CONSTRAINTS MICROINSURANCE EXPENDITURES AGRICULTURAL LAND SMALLHOLDER FARMERS RURAL MARKET RISK TRANSFER ECONOMICS POLICY PRIVATE TRANSFERS MANAGEMENT INSURANCE COSTS INSURANCE INSURANCE PREMIUMS LOSS CONSUMPTION SMOOTHING THEORY INSURANCE PAYMENTS DURABLE INVESTMENT ECONOMIC IMPACTS RISK INDEMNITY RURAL AREAS POVERTY CREDIT MARKET CONSTRAINTS TRANSACTIONS COSTS RISK TAKING INFORMAL INSURANCE POOR LIVING INVESTMENTS RISK MANAGEMENT HOUSEHOLD EXPENDITURES POOR INDEMNITY PAYMENTS REMITTANCES OUTCOMES BASIS RISK COVERAGE BENEFITS CREDIT MARKET PREMIUMS de Janvry, Alain Ramirez Ritchie, Elizabeth Sadoulet, Elisabeth Weather Index Insurance and Shock Coping : Evidence from Mexico's CADENA Program
geographic_facet	Latin America & Caribbean Mexico
relation	Policy Research Working Paper;No. 7715
description	Weather risk and incomplete insurance markets are significant contributors to poverty for rural households in developing countries. Weather index insurance has emerged as a possible tool for overcoming these challenges. This paper provides evidence on the impact of weather index insurance from a pioneering, large-scale insurance program in Mexico. The focus of this analysis is on the ex-post effects of insurance payments. A regression discontinuity design provides find evidence that payments from weather index insurance allow farmers to cultivate a larger land area in the season following a weather shock. Households in municipalities receiving payment also appear to have larger per capita expenditures and income in the subsequent year, although there is suggestive evidence that some of this increase is offset by a decrease in remittances. While the cost of insurance appears to be high relative to the payouts, the benefits exceed the costs for a substantial range of outcomes.
format	Working Paper
author	de Janvry, Alain Ramirez Ritchie, Elizabeth Sadoulet, Elisabeth
author_facet	de Janvry, Alain Ramirez Ritchie, Elizabeth Sadoulet, Elisabeth
author_sort	de Janvry, Alain
title	Weather Index Insurance and Shock Coping : Evidence from Mexico's CADENA Program
title_short	Weather Index Insurance and Shock Coping : Evidence from Mexico's CADENA Program
title_full	Weather Index Insurance and Shock Coping : Evidence from Mexico's CADENA Program
title_fullStr	Weather Index Insurance and Shock Coping : Evidence from Mexico's CADENA Program
title_full_unstemmed	Weather Index Insurance and Shock Coping : Evidence from Mexico's CADENA Program
title_sort	weather index insurance and shock coping : evidence from mexico's cadena program
publisher	World Bank, Washington, DC
publishDate	2016
url	http://documents.worldbank.org/curated/en/2016/06/26510002/weather-index-insurance-shock-coping-evidence-mexicos-cadena-program http://hdl.handle.net/10986/24632
_version_	1764457232086335488

Weather Index Insurance and Shock Coping : Evidence from Mexico's CADENA Program

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