14 Aug 2013 07:08 am

Risk characterizes everyday life for many of the world’s poorest households. When this risk is uninsured, it poses a considerable cost to current and future welfare, as harmful events lead to reduced consumption and asset loss.

14 Aug 2013 07:08 am

We show theoretically that the presence of basis risk in index insurance makes it a complement to informal risk sharing, implying that index insurance crowds-in risk sharing and leading to a prediction that demand will be higher among groups of individuals that can share risk.