Statistical Analysis of Rainfall Insurance Payouts in Southern India

20 Pages Posted: 20 Apr 2016

See all articles by Xavier Giné

Xavier Giné

World Bank - Development Research Group (DECRG)

Robert M. Townsend

MIT - Department of Economics

James I. Vickery

Federal Reserve Bank of Philadelphia

Date Written: December 1, 2007

Abstract

Using 40 years of historical rainfall data, this paper estimates a distribution for payouts on rainfall insurance policies offered to farmers in the State of Andhra Pradesh, India, in 2006. The authors find that the contracts primarily protect households against extreme tail events; half the expected value of indemnities paid by the insurance are generated by only 2 percent of rainfall realizations. Contract payouts are significantly correlated cross-sectionally, and also inversely associated with real GDP growth. The paper discusses the implications of these findings for the potential benefits of insurance to households, the risks facing a financial institution underwriting rainfall insurance contracts, and pricing.

Keywords: Debt Markets, Deposit Insurance, Labor Policies, Emerging Markets

Suggested Citation

Gine, Xavier and Townsend, Robert M. and Vickery, James Ian, Statistical Analysis of Rainfall Insurance Payouts in Southern India (December 1, 2007). World Bank Policy Research Working Paper No. 4426, Available at SSRN: https://ssrn.com/abstract=1062408

Xavier Gine

World Bank - Development Research Group (DECRG) ( email )

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HOME PAGE: https://sites.google.com/site/decrgxaviergine/

Robert M. Townsend

MIT - Department of Economics ( email )

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James Ian Vickery (Contact Author)

Federal Reserve Bank of Philadelphia ( email )

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Philadelphia, PA 19106
United States
+12155746549 (Phone)

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

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