Pitfalls and Potential of Institutional Change: Rain-Index Insurance and the Sustainability of Rangeland Management

34 Pages Posted: 9 Dec 2009 Last revised: 19 Jun 2011

See all articles by Birgit Müller

Birgit Müller

UFZ - Helmholtz Centre for Environmental Research Leipzig-Halle

Martin F. Quaas

German Centre for Integrative Biodiversity Research (iDiv) Halle-Jena-Leipzig

Karin Frank

Helmholtz Centre for Environmental Research - UFZ, Leipzig

Stefan Baumgärtner

University of Freiburg - Department of Environment and Natural Resources

Date Written: May 20, 2011

Abstract

Rain-index insurance is strongly advocated in many parts of the developing world to help farmers coping with climatic risk that prevails in (semi-)arid rangelands due to low and highly uncertain rainfall. We present a modeling analysis of how the availability of rain-index insurance affects the sustainability of rangeland management. We show that a rain-index insurance with frequent payoffs, i.e. a high strike level, leads to the choice of less sustainable grazing management than without insurance available. However, a rain-index insurance with a low to medium strike level enhances the farmer's well-being while not impairing the sustainability of rangeland management.

Keywords: ecological-economic modeling, weather-index insurance, Namibia, grazing management, risk, sustainability, weather-based derivatives

JEL Classification: D81, G22, Q14, Q56, Q57

Suggested Citation

Müller, Birgit and Quaas, Martin F. and Frank, Karin and Baumgärtner, Stefan, Pitfalls and Potential of Institutional Change: Rain-Index Insurance and the Sustainability of Rangeland Management (May 20, 2011). Ecological Economics, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1501003

Birgit Müller

UFZ - Helmholtz Centre for Environmental Research Leipzig-Halle ( email )

Permoserstrasse 15
D-04318 Leipzig
Germany

HOME PAGE: http://www.ufz.de/index.php?en=15522

Martin F. Quaas (Contact Author)

German Centre for Integrative Biodiversity Research (iDiv) Halle-Jena-Leipzig ( email )

Deutscher Platz 5e
Leipzig, 04103
Germany

HOME PAGE: http://www.idiv.de/bioecon

Karin Frank

Helmholtz Centre for Environmental Research - UFZ, Leipzig ( email )

Permoserstrasse 15
Leipzig, D-04318
Germany

Stefan Baumgärtner

University of Freiburg - Department of Environment and Natural Resources ( email )

Tennebacher Str. 4
Freiburg, 79106
Germany

HOME PAGE: http://www.ere.uni-freiburg.de

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