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Uncertain Monsoon, Irrigation and Crop Yields: Implications for Pricing of Insurance Products

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  • Singh, Hardeep
  • Negi, Digvijay S.
  • Birthal, Pratap S.

Abstract

A significant body of literature interested in studying the impact of weather risks on agricultural performance has modeled crop yields as a function of either levels or deviations in seasonal rainfall. However, an aspect that has received little attention in the literature relates to the impact of timing of the arrival of the monsoon on agricultural performance. In this paper, using a pan-India district-level panel dataset for a period of 50 years, we investigate three interrelated issues that are critical for managing the weather-induced agricultural risks. One, we examine the impact of timing of the arrival of the monsoon on crop yields. Two, we assess the mitigation benefits of irrigation against a delayed monsoon. And three, by simulating premium rates for an area yield insurance product at varying levels of irrigation coverage, we argue for differential pricing of insurance products for irrigated and rainfed crops or regions.

Suggested Citation

  • Singh, Hardeep & Negi, Digvijay S. & Birthal, Pratap S., 2020. "Uncertain Monsoon, Irrigation and Crop Yields: Implications for Pricing of Insurance Products," EfD Discussion Paper 20-28, Environment for Development, University of Gothenburg.
    • Handle: RePEc:hhs:gunefd:2020_028
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    More about this item

    Keywords

    Monsoon onset; Crop yields; Irrigation; Crop insurance; Premiums;
    All these keywords.

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • Q10 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - General
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General

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