Evidence on the Impact of Index Insurance on Small Farm Investment and Social Protection
Households in developing rural economies face a multitude of risks. When financial alternatives are limited, in the face of disaster, households typically turn to two coping strategies: reduction of assets to smooth consumption, or reduction of consumption to protect assets. Both of these strategies can have costly long-term economic consequences. Before a shock even occurs, households may try to further protect themselves by avoiding risky — but potentially profitable — opportunities for growth.