Does Index Insurance Crowd in or Crowd Out Informal Risk Sharing? Evidence from Rural Ethiopia

20 Pages Posted: 21 Apr 2020

See all articles by Kazushi Takahashi

Kazushi Takahashi

Sophia University

Christopher B. Barrett

Cornell University - Charles H. Dyson School of Applied Economics & Management

Munenobu Ikegami

Hosei University - Department of Economics

Date Written: April 2019

Abstract

We study how the introduction of a formal index insurance product affects informal risk‐sharing among pastoralists in southern Ethiopia. Using detailed social networks data, randomized incentives to purchase the insurance product, and hypothetical informal transfer data that mirror the existing customary arrangements, we find respondents’ own formal insurance uptake has no significant effect on their willingness to share risk through customary institutions. We also find weak evidence that a randomly matched peer's insurance uptake positively influences respondents’ willingness to make informal transfers to that match. Overall, our results imply that in this context index insurance does not crowd out informal risk‐sharing mediated by social networks.

Keywords: Drought, livestock, pastoralism, social networks

Suggested Citation

Takahashi, Kazushi and Barrett, Christopher B. and Ikegami, Munenobu, Does Index Insurance Crowd in or Crowd Out Informal Risk Sharing? Evidence from Rural Ethiopia (April 2019). American Journal of Agricultural Economics, Vol. 101, Issue 3, pp. 672-691, 2019, Available at SSRN: https://ssrn.com/abstract=3578905 or http://dx.doi.org/10.1093/ajae/aay042

Christopher B. Barrett

Cornell University - Charles H. Dyson School of Applied Economics & Management ( email )

315 Warren Hall
Ithaca, NY 14853-7801
United States
607-255-4489 (Phone)
607-255-9984 (Fax)

HOME PAGE: http://aem.cornell.edu/faculty_sites/cbb2/

Munenobu Ikegami

Hosei University - Department of Economics ( email )

Tokyo
Japan

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