Targeting Weather Insurance Markets

Journal of Risk and Insurance (forthcoming)

44 Pages Posted: 14 Sep 2020 Last revised: 17 Nov 2020

See all articles by Anita Mukherjee

Anita Mukherjee

Wisconsin School of Business

Shawn Allen Cole

Harvard Business School

Jeremy Tobacman

Alfred Lerner College of Business and Economics, University of Delaware

Date Written: July 30, 2020

Abstract

The suitability of insurance products often depends greatly on individual circum- stances. This paper examines the challenges of heterogeneity in a relatively new product, weather-indexed insurance. This index insurance product has been launched in over a dozen countries, with the goal of enabling households engaged in agricultural ac- tivity a means to manage risk. Using data from a large-scale field experiment, we build and calibrate a model which accounts for household investment decisions, including the scope for self-insurance via labor markets to (risky) wage work. Our results show that insurance is most valuable to households with reduced access to wage labor, or to those who face wages that are sensitive to rainfall risk. These findings have important implications for areas where index insurance is most effective.

Keywords: index insurance, self-insurance, labor markets, self-protection

JEL Classification: G22, D14, O13, O16, Q14

Suggested Citation

Mukherjee, Anita and Cole, Shawn Allen and Tobacman, Jeremy, Targeting Weather Insurance Markets (July 30, 2020). Journal of Risk and Insurance (forthcoming) , Available at SSRN: https://ssrn.com/abstract=3665486 or http://dx.doi.org/10.2139/ssrn.3665486

Anita Mukherjee (Contact Author)

Wisconsin School of Business ( email )

975 University Avenue
Madison, WI 53706
United States

HOME PAGE: http://www.anitamukherjee.com

Shawn Allen Cole

Harvard Business School ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States

Jeremy Tobacman

Alfred Lerner College of Business and Economics, University of Delaware ( email )

Newark, DE 19716
United States

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