The Welfare Effects of Index-Based Livestock Insurance: Livestock Herding on Communal Lands
通过理论模型证明，发展中国家的指数型牲畜保险可能因公共牧场过度放牧而降低放牧收益，福利效应存在根本性不确定性。
Abstract Agricultural (index) insurance for smallholders in developing countries has gained traction in academic and policy circles. The expectation is that the uptake of insurance will protect smallholders from production shocks and incentivize them to modernize production. We develop a simple theoretical model to demonstrate that the welfare effects of insurance are fundamentally ambiguous—even in the absence of transaction costs or basis risk. The second-best nature of the institutional context within which smallholders operate implies that the uptake of insurance may accentuate pre-existing inefficiencies. This idea is worked out in detail for the case of livestock herding on common grazing lands. Our theoretical model predicts that insurance invites overstocking of communal lands, and lowers the profitability of herding when common pastures are degraded.