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" Essays in Weather Insurance and Development "
Matsuda, Ayako
Ligon, Ethan A
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Latin Dissertation
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English
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| Record Number
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903725
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| Doc. No
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TL1jh688dj
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| Main Entry
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Matsuda, Ayako
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| Title & Author
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Essays in Weather Insurance and Development\ Matsuda, AyakoLigon, Ethan A
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| College
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UC Berkeley
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| Date
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2013
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| student score
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2013
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| Abstract
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Weather index insurance has been attracting much attention from academics and policy makers. When deciding whether and how much insurance to obtain, farmers face a trade-off: while an increasing acre coverage reduces the weather risk, it increases the basis risk. This dissertation investigates the demand for rainfall index insurance in India. Chapter 1 presents the subsidy experiment that was conducted in India and describes the key variables collected. It offers directions for quantitative research using the analyzed dataset. In Chapter 2, I particularly focus on the relationships among basis risk, weather risk, and the risk aversion of potential insurance buyers. Based on the subsidy experiment, I develop a structural model, and estimate the risk aversion parameters. The estimated risk aversion is found to be consistent with the observed inelasticity of demand for many farmers. I also show that a heterogeneity of socio-economic characteristics affects the level of the estimated risk aversion. I find that age, education, and literacy are negatively correlated with the estimated risk aversion. Finally, I derive an aggregate demand and conduct a counterfactual analysis to quantify the effect of basis risk. I find that basis risk is important enough that only farmers within approximately 4km to a weather station can actually reduce the overall risk by purchasing this insurance.
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Ligon, Ethan A
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UC Berkeley
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