Weak or inexistent crop insurance markets are widely recognized as a significant constraint to rural development in low income countries. In response, policy-makers and researchers have proposed index insurance as a sustainable, market-based solution. Before moving forward with major insurance initiatives, however, accumulated empirical evidence on the impact of insurance is needed.
To date, this evidence is scant. Giné et. al. (2008) provide evidence on the determinants of demand for the index insurance in India, home of the largest and most wellestablished index insurance market in the developing world. In a pilot program in Malawi, Giné and Yang (2009) find the counter-intuitive result that index insurance actually lowers credit demand and technology adoption of small farmers. Cai et. al. (2009) find a more intuitive result that a conventional (non-index) insurance for sow mortality in rural China significantly increased households’ investments in sows.
These research initiatives are important initial steps in the accumulation of knowledge and understanding of how index insurance works and whether or not it is likely to deliver on the promise of positive impacts on household welfare and efficiency of the rural economy. Additional, systematic research efforts are clearly needed. This paper, which is primary methodological, seeks to facilitate future efforts.