Displaying all posts by Elise Corwin
March 28, 2013
In many places, agriculture is highly seasonal. That presents difficulties for subsistence farmers who have to stretch incomes year-round. If farmers (or family members) could migrate during the off-season to areas where wage labor is available, they could substantially smooth their annual income and consumption. Indeed, this is what happens in many places. But even where seasonal migration does happen, many people don't migrate even when it seems it would be advantageous to do so. Why?
One way to cope with an emergency is to borrow money from family and friends. But that typically doesn’t work when a disaster strikes a whole area. Sending and receiving money over larger distances, when transferring cash from person-to-person is impractical or impossible, can be very expensive. There are a litany of costs, from communications, to finding and traveling to agents, to the actual financial cost of the transfer. And don’t forget the cost of delay—in an emergency, delays in receiving needed funds can have big consequences.
Intuitively, insurance should be highly appealing to poor households for two reasons—they face a lot of risks, and have few resources to effectively deal with negative shocks. But microinsurance hasn’t taken off. That leads to two main questions: Does microinsurance provide the benefits that we theoretically think it does? And if so, how do we overcome the barriers that are preventing people from buying insurance? Of course, the answer to the second is quite dependent on the answer to the first.