Insurance and Rural Welfare

Tinbergen Institute Discussion Paper No. 07-011/2

26 Pages Posted: 2 Feb 2007

See all articles by Chris Elbers

Chris Elbers

Vrije Universiteit Amsterdam, School of Business and Economics; Tinbergen Institute - Tinbergen Institute Amsterdam (TIA)

Jan Willem Gunning

Vrije Universiteit Amsterdam, School of Business and Economics; Tinbergen Institute; Tinbergen Institute - Tinbergen Institute Amsterdam (TIA)

Lei Pan

Vrije Universiteit Amsterdam, School of Business and Economics

Date Written: January 2007

Abstract

Assessing the scope for insurance in rural communities usually requires a structural model of household behavior under risk. One of the few empirical applications of such models is the study by Rosenzweig and Wolpin (1993) who conclude that Indian farmers in the ICRISAT villages would not benefit from the introduction of formal weather insurance. In this paper we investigate how models such as theirs can be estimated from panel data on production and assets. We show that if assets can take only a limited number of values the coefficients of the model cannot be estimated with reasonable precision. We also show that this can affect the conclusion that insurance would not be welfare improving.

Keywords: Structural estimation, discrete choices, insurance

JEL Classification: C51, D91

Suggested Citation

Elbers, Chris and Gunning, Jan Willem and Pan, Lei, Insurance and Rural Welfare (January 2007). Available at SSRN: https://ssrn.com/abstract=960419 or http://dx.doi.org/10.2139/ssrn.960419

Chris Elbers (Contact Author)

Vrije Universiteit Amsterdam, School of Business and Economics ( email )

De Boelelaan 1105
Amsterdam, 1081HV
Netherlands

Tinbergen Institute - Tinbergen Institute Amsterdam (TIA) ( email )

Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands

Jan Willem Gunning

Vrije Universiteit Amsterdam, School of Business and Economics ( email )

De Boelelaan 1105
Amsterdam, 1081HV
Netherlands
+ 310 20 444 6141 (Phone)
+ 310 20 444 6004 (Fax)

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

Tinbergen Institute - Tinbergen Institute Amsterdam (TIA) ( email )

Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands

Lei Pan

Vrije Universiteit Amsterdam, School of Business and Economics ( email )

De Boelelaan 1105
Amsterdam, 1081HV
Netherlands

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