After the Drought: The Impact of Microinsurance on Consumption Smoothing and Asset Protection / Sarah A. Janzen, Michael R. Carter.

Format:

Book

Author/Creator:

Janzen, Sarah A.

Contributor:

National Bureau of Economic Research.

Carter, Michael R.

Series:

Working Paper Series (National Bureau of Economic Research) no. w19702.

NBER working paper series no. w19702

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

After the Drought

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2013.

Summary:

To cope with shocks, poor households with inadequate access to financial markets can sell assets to smooth consumption and, or reduce consumption to protect assets. Both coping strategies can be economically costly and contribute to the transmission of poverty, yet limited evidence exists regarding the effectiveness of insurance to mitigate these costs in risk-prone developing economies. Utilizing data from an RCT in rural Kenya, this paper estimates that on average an innovative microinsurance scheme reduces both forms of costly coping. Threshold econometrics grounded in theory reveal a more complex pattern: (i) wealthier households primarily cope by selling assets, and insurance makes them 96 percentage points less likely to sell assets following a shock; (ii) poorer households cope primarily by cutting food consumption, and insurance reduces by 49 percentage points their reliance on this strategy.

Notes:

Print version record

December 2013.