hot stuff index insurance for indian pepper growers summary we simulate the impact of a joint price and yield index insurance on the basis of a small representative panel data set of indian smallholder pepper growers affordable and feasible index insurance reduces crop revenue risk to around 68 of its original level while a reduction to 50 of this level can be achieved with ideal insurance basis risk is large for only a small fraction of farm households depending on risk aversion 5 30 of farm households is willing to pay for index insurance increasing to 12 50 with a 50 premium reduction opportunity costs of consumption smoothing in the form of lower productivity levels suggest potential welfare gains of specialization with insurance

progress along the path evolving issues in the measurement of genuine saving more than 10 years since a practical linkage between sustainable development and a measure of national wealth expanded to include natural and environmental resources was first posited the empirical estimation of adjusted net savings dubbed genuine saving has evolved considerably in this paper we take stock of both progress achieved and the challenges that remain we begin by recalling the key points made in pearce and atkinson 1993 ecol econ 8 103 which presented the first cross country estimates of savings rates adjusted to reflect depletion and degradation of the environment we then briefly summarise the evolution of the theoretical argument linking savings and sustainability however the main focus of this paper is an aspect that concerned david pearce greatly namely the evolution of the measurement of genuine savings we identify and consider the empirical evidence with regard to two particular measurement issues the valuation of exhaustible resources and environmental degradation common to the both issues are concerns about measuring changes in national wealth in real world economies

credit market constraints consumption smoothing and the accumulation of durable production assets in low income countries investments in bullocks in india in this paper we formulate and estimate a finite horizon structural dynamic model of agricultural investment behavior that incorporates the major features of low income agricultural environments income uncertainty constraints on borrowing and rental markets and the use of investment assets to generate income and smooth consumption the model is fit to longitudinal indian household data on farm profits bullock stocks and pump sets the estimated structural parameters are used to assess the effects on the life cycle accumulation of bullocks agricultural profits and welfare associated with complete markets and bullock liquidity and with second best policies that provide assured sources of income to farmers and weather insurance

do informal risk sharing networks crowd out public voluntary health insurance evidence from vietnam many governments in low income countries have promoted voluntary health insurance schemes in recent years with the principal aim of improving access to services amongst those working in the informal economy few attempts to understand demand for such schemes exist particularly in light of the importance of informal social security arrangements for many households a model of demand for health insurance is developed reflecting this context and estimated using data from vietnam the results show that informal financial networks may crowd out government promoted health insurance implications for theory and policy are discussed

poverty comparisons over time and across countries in africa abstract we use demographic and health surveys dhs to compare poverty at two or more points in time within and between african countries our welfare measure is an index resulting from a factor analysis of various household characteristics durables and household heads education an advantage of this measure is that for intertemporal and intraregional comparisons we need not rely on suspect price deflators and currency conversion factors the wide availability and similarity of questionnaires of the dhs facilitate comparisons over both time and countries our results generally show declines in poverty during the previous decade largely due to improvements in rural areas

persistent poverty and informal credit abstract this paper explores the consequences of nonlinear wealth dynamics for the formation of bilateral credit arrangements to help manage idiosyncratic risk using original data on expected wealth dynamics social networks and informal loans among southern ethiopian pastoralist households we find that the threshold at which expected wealth dynamics bifurcate serves as a focal point at which lending is concentrated informal lending responds to recipients losses but only so long as the recipients are not too poor our results suggest that when shocks can have long term effects loans are best understood as providing a safety net rather than a scale neutral insurance mechanism furthermore the persistently poor are excluded from social networks that are necessary to obtain loans given in response to shocks

the economics of poverty traps and persistent poverty an asset based approach abstract longitudinal data on household living standards open the way to a deeper analysis of the nature and extent of poverty while a number of studies have exploited this type of data to distinguish transitory from more chronic forms of income or expenditure poverty this paper develops an asset based approach to poverty analysis that makes it possible to distinguish deep rooted persistent structural poverty from poverty that passes naturally with time due to systemic growth processes drawing on the economic theory of poverty traps and bifurcated accumulation strategies this paper briefly discusses some feasible estimation strategies for empirically identifying poverty traps and long term persistent structural poverty as well as relevant extensions of the popular foster greer thorbecke class of poverty measures the paper closes with reflections on how asset based poverty can be used to underwrite the design of persistent poverty reduction strategies

poverty traps and index based risk transfer products summary a growing literature suggests that in low income countries households with few assets can be trapped in chronic poverty this article reviews relevant threads of the poverty traps literature to motivate a description of the opportunities presented by innovative index based risk transfer products these products can be used to address some insurance and credit market failures that contribute to the persistence of poverty among households in low income countries applications are considered at the micro meso and macro levels 2008 elsevier ltd all rights reserved

wealth as a criterion for sustainable development in this article the authors define sustainable development as an economic programme along which social well being does not decline over time it can be shown that the requirement is equivalent to the maintenance of a comprehensive measure of wealth where an economy s wealth is defined to be the social worth of its entire array of capital assets including natural capital using data published by the world bank on the world s poorest regions countries which would be regarded as having performed well if judged on the basis of such indices as gnp per head or the human development index are found to have grown poorer a few alarmingly so

risk and insurance in a rural credit market an empirical investigation in northern nigeria credit contracts play a direct role in pooling risk between households in northern nigeria repayments owed by borrowers depend on realizations of random shocks by both borrowers and lenders the paper develops two models of state contingent loans the first is a competitive equilibrium in perfectly enforceable contracts the second permits imperfect information and equilibrium default estimates of both models indicate that quantitatively important state contingent payments are embedded in these loan transactions but that a fully efficient risk pooling equilibrium is not achieved the research is based on a year long survey in zaria nigeria conducted by the author

how substitutable is natural capital one of the recurring themes in the sustainability literature has been the extent to which a loss of natural capital can be made up for in welfare terms by an increase in other forms of capital this issue was raised early on in the debate on sustainability by pearce and has never really been resolved this paper is an empirical attempt to measure the degree of substitutability between different forms of capital a nested ces production function is used to allow flexibility in the estimated elasticities of substitution also within this specification natural resources and other inputs are combined in different levels of the function thus allowing for different levels of substitutability institutional and economic indicators are also incorporated in the production function estimated results show that the elasticities derived from functions involving land resources were generally around one or greater implying a fairly high degree of substitutability furthermore changes in trade openness and private sector investment have a statistically significant and direct relationship on the efficiency of production and hence on income generation no statistically significant relationship between income and any of the institutional indicators was found

can insurance payouts prevent a poverty trap evidence from randomised experiments in northern kenya index based insurance can have welfare enhancing effects through two pathways by inducing policyholders to change their investment and risk management decisions or by mitigating weather related sh

are there gender differences in demand for index based livestock insurance abstractrisk management plays a role in avoiding and escaping chronic poverty throughout the world particularly for women who are disproportionately negatively affected by shocks using three years of household survey data administrative records and qualitative interviews this paper examines the relationship between gender and demand for index based livestock insurance ibli among pastoralists in southern ethiopia ibli appears to be equitably accessed by men and women alike and we find limited evidence of gender differentiated demand for ibli we also find only modest differences associated with age and share of income from livestock

patterns of rainfall insurance participation in rural india take up of an innovative rainfall insurance policy offered to smallholder farmers in rural india decreases with basis risk between insurance payouts and income fluctuations increases with household wealth and decreases with binding credit constraints these results are consistent with the predictions of a simple neoclassical model with borrowing constraints other patterns are less consistent with the benchmark model for example participation in village networks and measures of familiarity with the insurance vendor are strongly correlated with insurance take up decisions and risk averse households are less not more likely to purchase insurance these results may reflect household uncertainty about the product given their limited experience with it

the effect of male migration on employment patterns of women in nepal what is the impact of male migration on the labor market behavior of women in nepal the instrumental variable full information maximum likelihood method is applied to data from the 2004 nepal household survey to account for unobserved factors that could simultaneously affect men s decision to migrate and women s decision to participate in the labor market the results indicate that male migration has a negative impact on the level of the labor market participation by women in the migrant sending household there is evidence of substantial heterogeneity based on both observable and unobservable characteristics in the impact of male migration the findings highlight the important gender dimension of the impact of predominantly male migration on the well being of sending households strategies for economic development in nepal should take into account such gender aspects of the migration dynamics

income smoothing and consumption smoothing one way that risk averse households protect consumption levels is to borrow and use insurance mechanisms another way common in low income economies is to diversify economic activities and make conservative production and employment choices households thus tend toward limiting exposure only to shocks that can be handled with available credit and insurance typically both types of mechanisms are studied independently but much more can be learned by studying them together first we obtain a more complete picture of risks costs and insurance possibilities second it opens the way to considering biases in standard tests of credit and insurance

community based risk management arrangements a review summary risk and its consequences pose a formidable threat to poverty reduction efforts this article reviews a plethora of community based risk management arrangements across the developing world these types of arrangements are garnering greater interest in light of the growing recognition of the relative prominence of household or individual specific idiosyncratic risk as well as the increasing shift towards community based development funding the article discusses potential advantages such as targeting cost and informational and disadvantages such as exclusion and inability to manage correlated risk of these arrangements and their implications for the design of community based social protection programs and policies

exchange rate speculation and chaos inducing intervention abstract we show that in a market characterized by high volatility transactions designed to have a stabilizing effect may inadvertently induce chaos in the foreign exchange market for example excessive interventions by a central bank may lead to an increase in erratic behavior rather than to the calming of exchange rate movements

capital theory and the measurement of sustainable development an indicator of weak sustainability the measurement of sustainable development is not without considerable difficulties yet this should not detract from the positive advances that can be made in this direction in this paper we present one form that a weak sustainability indicator can take derived from a simple but intuitive savings rule it incorporates the idea that the level of overall capital stock should be non decreasing although subject to qualification at this stage some interesting results emerge from the application of the rule to 18 countries

the conditions for achieving environmentally sustainable development this paper is interested in the narrower interpretation the relationship between environmental quality and sustainable economic activity the latter is interpreted as that level of economic activity which leaves the environmental quality level intact with the policy objective corresponding to this notion being the maximization of net benefits of economic development subject to maintaining the services and quality of natural resources over time 3

insurance credit and technology adoption field experimental evidence from malawi this brief summarizes the insurance credit and technology adoption field experimental evidence from malawi the farmers were offered loans for the november 2006 planting season does production risk suppress the demand for credit the author implemented a randomized field experiment to ask whether provision of insurance against a major source of production risk induces farmers to take out loans to adopt a new crop technology the study sample was composed of roughly 800 maize and groundnut farmers in malawi where by far the dominant source of production risk is the level of rainfall the author randomly selected half of the farmers to be offered credit to purchase high yielding hybrid maize and groundnut seeds for planting in the november 2006 crop season the other half of farmers were offered a similar credit package but were also required to purchase at actuarially fair rates a weather insurance policy that partially or fully forgave the loan in the event of poor rainfall surprisingly take up was lower by 13 percentage points among farmers offered insurance with the loan take up was 33 0 percent for farmers who were offered the uninsured loan there is suggestive evidence that reduced take up of the insured loan was due to farmers already having implicit insurance from the limited liability clause in the loan contract insured loan take up was positively correlated with farmer education income and wealth which may proxy for the individual s default costs by contrast take up of the uninsured loan was uncorrelated with these farmer characteristics

subsidies and crowding out a double hurdle model of fertilizer demand in malawi this article uses a double hurdle model with panel data from malawi to investigate how fertilizer subsidies affect farmer demand for commercial fertilizer the article controls for potential endogeneity caused by the nonrandom targeting of fertilizer subsidy recipients results show that on average 1 additional kilogram of subsidized fertilizer crowds out 0 22 kg of commercial fertilizer but crowding out ranges from 0 18 among the poorest farmers to 0 30 among relatively nonpoor farmers this indicates that targeting fertilizer subsidies to the rural poor is likely to maximize the contribution of the subsidy program to total fertilizer use

understanding declining mobility and inter household transfers among east african pastoralists we model interhousehold transfers between nomadic livestock herders as the state dependent consequence of individuals strategic interdependen ce resulting from the existence of multiple opposing externalities a public good security ext ernality among individuals sharing a social e g ethnic identity in a potentially hostile en vironment creates incentives to band together self interested interhousehold wealth transfers fro m wealthier herders to poorer ones may emerge endogenously within a limited wealth space as a mea ns to motivate accompanying migration by the recipient the distributional reach and size o f the transfer are limited however by a resource appropriation externality related to the use of com mon property grazing lands when this effect dominates it can induce transfers from households who want to relieve grazing pressures caused by others herds our model augments the extant li terature on transfers and is perhaps more consistent with the limited available empirical evi dence on heterogeneous and changing transfers patterns among east african pastoralists the core principles of our model possibly apply more broadly for example to long distance migrants or e ven among foot soldiers in street gangs

wealth and sustainable development the role of david pearce green net national product was thought to be one way of measuring sustainable income however david pearce understood that a better measure of sustainable development was to look at what a generation is leaving in form of capital assets to later generations in this article his arguments and insights are highlighted against recent theoretical advances

pricing in microinsurance markets summary microinsurance markets have exhibited strong growth rates in recent years great parts of the industry are however challenged by fundamental issues of providing insurance products one of the most significant of which is pricing risk in this paper we provide a nontechnical analysis of insurance pricing problems and a review of the set of opportunities that can address some of the specific pricing constraints in microinsurance markets a key contribution of this paper is the investigation of conventional techniques as potential solutions for improving the pricing of insurance risk in microinsurance markets

evaluating projects and assessing sustainable development in imperfect economies we are interested in three related questions 1 how should accounting prices be estimated 2 how should we evaluate policy change in an imperfect economy 3 how can we check whether intergenerational well being will be sustained along a projected economic programme we do not presume that the economy is convex nor do we assume that the government optimizes on behalf of its citizens we show that the same set of accounting prices should be used both for policy evaluation and for assessing whether or not intergenerational welfare along a given economic path will be sustained we also show that a comprehensive measure of wealth computed in terms of the accounting prices can be used as an index for problems 2 and 3 above the remainder of the paper is concerned with rules for estimating the accounting prices of several specific environmental natural resources transacted in a few well known economic institutions

short run subsidies and long run adoption of new health products evidence from a field experiment short run subsidies for health products are common in poor countries how do they affect long run adoption a common fear among development practitioners is that one off subsidies may negatively affect long run adoption through reference dependence people might anchor around the subsidized price and be unwilling to pay more for the product later but for experience goods one off subsidies could also boost long run adoption through learning this paper uses data from a two stage randomized pricing experiment in kenya to estimate the relative importance of these effects for a new improved antimalarial bed net reduced form estimates show that a one time subsidy has a positive impact on willingness to pay a year later inherit to separately identify the learning and anchoring effects we estimate a parsimonious experience good model estimation results show a large positive learning effect but no anchoring we black then discuss the types of products and the contexts inherit for which these results may apply

experimental evidence on the drivers of index based livestock insurance demand in southern ethiopia while index based microinsurance has attracted considerable attention uptake rates have been weak in many low income countries we explore the purchase patterns of index based livestock insurance in southern ethiopia focusing on the role of accurate product comprehension and price we find that randomly distributed learning kits improve subjects knowledge of the products however we do not find strong evidence that the improved knowledge per se causes greater insurance uptake we also find that reduced price due to randomly distributed discount coupons has an immediate positive impact on uptake without dampening subsequent period demand due to reference dependence associated with price anchoring effects

productivity credit risk and the demand for weather index insurance in smallholder agriculture in ethiopia the article explores the relationship between fertilizer use and the demand for weather index insurance wii among smallholder farmers in ethiopia we examine whether fertilizer use is profitable under current smallholder production conditions whether risk related factors affect fertilizer use and we estimate the returns to inputs in the agricultural production function in the absence of insurance we then study how these primitives of agricultural production functions relate to insurance demand the study compares a survey based estimate of willingness to pay with actual uptake for the weather insurance finding the stated and actual demand to be almost completely uncorrelated while those with high marginal returns to inputs say they would purchase insurance only those with low marginal returns actually do consistent with the stated purpose of the product as input insurance insurance demand proves to be highly responsive to the existence and amount of randomly allocated insurance vouchers jel classifications c83 g22 q12

limits to cba in uk and european environmental policy retrospects and future prospects this paper reviews the contemporary debate and the now long standing role of cba in uk and european environmental policy appraisal epa and looks forward to possible future applications the position taken is that despite its limitations cba still has an important part to play in epa however with the increasingly contested nature of environmental and related public policies and outcomes its role will become less prescriptive and its findings more constrained by social justice and ethical imperatives future cba is more likely to continue to flourish as a component in a wider policy analysis and decision support system whatever decision support system is eventually adopted its value will be judged on how well it aids real policymakers operating iteratively in the non linear real world political economy

stochastic wealth dynamics and risk management among a poor population we use herd history data collected among pastoralists in southern ethiopia to study stochastic wealth dynamics among a poor population although covariate rainfall shocks plainly matter household specific factors including own herd size account for most observed variability in wealth dynamics we find no support for the tragedy of the commons hypothesis past studies may have conflated costly self insurance with stocking rate externalities biophysical shocks move households between multiple dynamic wealth equilibria the lowest suggesting a poverty trap according to nonconvex path dynamics these findings have broad implications for development and relief strategies among a poor population vulnerable to climatic shocks a vast economic literature on risk management rests explicitly or implicitly on the classic friedmanite permanent income hypothesis studies of portfolio management consumption smoothing social insurance and the like all depend on the canonical assumption that stochastic income realisations are drawn from a stationary income distribution leading to consumption smoothing off a stable asset base the possibility of asset accumulation connects this literature to the immense literature on the theory and empirics of economic growth

making a difference how environmental economists can influence the policy process a case study of david w pearce can environmental economists influence policy if so how this paper addresses these two questions using the late david pearce s career as a case study influence can be exercised but pearce s career shows that certain conditions must be met the first is desire he wanted to influence policy and directed a high proportion of his efforts to doing so he focused particular attention on the power centres of his time the oecd world bank european commission un uk government his influence was aided by his status and location as a professor in a prestige university ucl in a major global city london his messages were consistent and clear theory is important and can be used to frame most environmental challenges as regards both explanation and solution externalities can be valued assessing benefits and costs of options is important market signals taxes etc and incentives generally are powerful shapers of behaviour stock of capital human built natural is a key measure of sustainability he communicated simply and clearly in words and phrases that ministers for finance and journalists could understand all of the broadsheet newspapers in england financial times guardian independent telegraph times were grist to pearce s mill of advocacy for environmental economics he provided the blueprint books that could be read on a commute and summaries to the media that they could fit into a 1 000 word piece he didn t seek out but neither did he shirk controversy he worked with various interest groups and politicians but never to the point were he was co opted he initiated and directed the msc in environmental and resource economics that created an ever widening and influential pool of advocates for his ideas finally he achieved a prodigious academic output that ensures a sort of immortality and provided the intellectual ballast the enabled his policy influence

weather index drought insurance an ex ante evaluation for millet growers in niger in the sudano sahelian region which includes south niger the inter annual variability of the rainy season is high and irrigation is limited as a consequence bad rainy seasons have a massive impact on crop yield and regularly result in food crises traditional insurance policies based on crop damage assessment are not available because of asymmetric information and high transaction costs compared to the value of production we assess the risk mitigation capacity of an alternative form of insurance which has been implemented at a large scale in india since 2003 insurance based on a weather index we compare the efficiency of various weather indices to increase the expected utility of a representative risk averse farmer we show the importance of using plot level yield data rather than village averages which bias results due to the presence of idiosyncratic shocks we also illustrate the need for out of sample estimations in order to avoid overfitting even with the appropriate index and assuming substantial risk aversion we find a limited gain of implementing insurance which roughly corresponds to or slightly exceeds the cost observed in india for implementing such insurance policies however when we separately treat the plots with and without fertilisers separately we see that the benefit of insurance is slightly higher in the former case this suggests that insurance policies may slightly increase the use of risk increasing inputs such as fertilisers and improved cultivars and hence improve average yields which remain very low in the region

corruption and the political economy of resource based development a comparison of asia and sub saharan africa we model how the supply and demand for bribes affects resource use by an economy and the reinvestment of resource rents in other assets this requires adjusting the world bank s measure adjusted net savings for any rent dissipation due to corruption the impacts of corruption on long run changes and periodic growth in the adjusted net savings rate are estimated across african and asian economies from 1970 to 2003 corruption rather than resource dependency per se affects negatively the ability of african countries to reinvest resource rents in the short term but for asian countries corruption is less important than point resources corruption influences long run growth in adjusted net savings rates in all countries and is also the pathway through which this growth is affected by patterns of resource use trade and abundance

agricultural decisions after relaxing credit and risk constraints the investment decisions of small scale farmers in developing countries are conditioned by their financial environment binding credit market constraints and incomplete insurance can limit investment in activities with high expected profits we conducted several experiments in northern ghana in which farmers were randomly assigned to receive cash grants grants of or opportunities to purchase rainfall index insurance or a combination of the two demand for index insurance is strong and insurance leads to significantly larger agricultural investment and riskier production choices in agriculture the binding constraint to farmer investment is uninsured risk when provided with insurance against the primary catastrophic risk they face farmers are able to find resources to increase expenditure on their farms demand for insurance in subsequent years is strongly increasing with the farmer s own receipt of insurance payouts with the receipt of payouts by others in the farmer s social network and with recent poor rain in the village both investment patterns and the demand for index insurance are consistent with the presence of important basis risk associated with the index insurance imperfect trust that promised

insuring well being buyer s remorse and peace of mind effects from insurance this paper estimates the causal effects of index insurance coverage on subjective well being among livestock herders in southern ethiopia the randomization of incentives to purchase index based livestock insurance and three rounds of panel data are exploited to separately identify ex ante welfare gains from insurance that reduces risk exposure and ex post buyer s remorse effects that may arise after the resolution of uncertainty insurance coverage currently in force generates subjective well being gains that are significantly higher than the buyer s remorse effect of an insurance that lapsed without paying out given the temporal correlation in insurance purchase propensity failure to control for potential buyer s remorse effects can bias downward estimates of welfare gains from current insurance coverage

the impact of kinship networks on the adoption of risk mitigating strategies in ethiopia the adoption of certain farm management practices such as tree planting and soil and water conservation can reduce exposure to weather shocks however in many countries the adoption of such risk mitigating measures is far from complete we explore how risk sharing networks in the form of kinship characterized by the moral imperative of within group sharing affects the adoption of risk mitigating activities in rural ethiopia we find suggestive evidence that compulsory sharing invites free riding and attenuates incentives for self protection against weather shocks we also find evidence of the existence of a possible substitution effect between credit and social networks