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Weather index insurance and shock coping : evidence from Mexico's CADENA Program

Author

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  • De Janvry,Alain F.
  • Ramirez Ritchie,Elizabeth Andrea
  • Sadoulet,Elisabeth Marie L.

Abstract

Weather risk and incomplete insurance markets are significant contributors to poverty for rural households in developing countries. Weather index insurance has emerged as a possible tool for overcoming these challenges. This paper provides evidence on the impact of weather index insurance from a pioneering, large-scale insurance program in Mexico. The focus of this analysis is on the ex-post effects of insurance payments. A regression discontinuity design provides find evidence that payments from weather index insurance allow farmers to cultivate a larger land area in the season following a weather shock. Households in municipalities receiving payment also appear to have larger per capita expenditures and income in the subsequent year, although there is suggestive evidence that some of this increase is offset by a decrease in remittances. While the cost of insurance appears to be high relative to the payouts, the benefits exceed the costs for a substantial range of outcomes.

Suggested Citation

  • De Janvry,Alain F. & Ramirez Ritchie,Elizabeth Andrea & Sadoulet,Elisabeth Marie L., 2016. "Weather index insurance and shock coping : evidence from Mexico's CADENA Program," Policy Research Working Paper Series 7715, The World Bank.
    • Handle: RePEc:wbk:wbrwps:7715
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    File URL: http://documents.worldbank.org/curated/en/563971467994584299/pdf/WPS7715.pdf
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    Cited by:

    1. Hansen, James & Hellin, Jon & Rosenstock, Todd & Fisher, Eleanor & Cairns, Jill & Stirling, Clare & Lamanna, Christine & van Etten, Jacob & Rose, Alison & Campbell, Bruce, 2019. "Climate risk management and rural poverty reduction," Agricultural Systems, Elsevier, vol. 172(C), pages 28-46.
    2. Shukri Ahmed & Craig McIntosh & Alexandros Sarris, 2020. "The Impact of Commercial Rainfall Index Insurance: Experimental Evidence from Ethiopia," American Journal of Agricultural Economics, John Wiley & Sons, vol. 102(4), pages 1154-1176, August.
    3. Aguilar, Arturo & Vicarelli, Marta, 2022. "El Niño and children: Medium-term effects of early-life weather shocks on cognitive and health outcomes," World Development, Elsevier, vol. 150(C).
    4. Olivier R de Bandt & Luc Jacolin & Thibault Lemaire, 2021. "Climate Change in Developing Countries: Global Warming Effects, Transmission Channels and Adaptation Policies," Working Papers hal-03948704, HAL.
    5. Jones, Kelly & Gong, Erick, 2021. "Precautionary savings and shock-coping behaviors: Effects of promoting mobile bank savings on transactional sex in Kenya," Journal of Health Economics, Elsevier, vol. 78(C).
    6. Daniel Lima Miquelluti & Vitor Augusto Ozaki & David José Miquelluti, 2022. "An Application of Geographically Weighted Quantile Lasso to Weather Index Insurance Design," RAC - Revista de Administração Contemporânea (Journal of Contemporary Administration), ANPAD - Associação Nacional de Pós-Graduação e Pesquisa em Administração, vol. 26(3), pages 200387-2003.
    7. Li, Hongping & Zha, Yong & Bi, Gongbing, 2023. "Agricultural insurance and power structure in a capital-constrained supply chain," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 171(C).
    8. King, Michael & Singh, Anuj Pratap, 2020. "Understanding farmers’ valuation of agricultural insurance: Evidence from Vietnam," Food Policy, Elsevier, vol. 94(C).
    9. Elena Kühne, 2020. "Building climate resilience through social protection in Brazil: the Garantia Safra public climate risk insurance programme," Policy Research Brief 70, International Policy Centre for Inclusive Growth.

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