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Insurance and Rural Welfare: What Can Panel Data Tell Us? Chris Elbers, Free University, Amsterdam and Tinbergen Institute Jan Willem Gunning, Free University, Amsterdam and Tinbergen Institute Lei Pan, Free University, Amsterdam and Tinbergen Institute WPS/2007-13 Download the Paper (PDF format) - August 14, 2007 Tell a colleague about it. Printing Tips: Select 'print as image' in the Acrobat print dialog if you have trouble printing. ABSTRACT: Assessing the scope for insurance in rural communities usually requires a structural model of household behavior under risk. One of the few empirical applications of such models is the study by Rosenzweig and Wolpin (1993) who conclude that Indian farmers in the ICRISAT villages would not benefit from the introduction of formal weather insurance. In this paper we investigate how models such as theirs can be estimated from panel data on production and assets. We show that if assets can take only a limited number of values the coefficients of the model cannot be estimated with reasonable precision. We also show that this can affect the conclusion that insurance would not be welfare improving. SUGGESTED CITATION: Chris Elbers, Jan Willem Gunning, and Lei Pan, "Insurance and Rural Welfare: What Can Panel Data Tell Us?" (August 14, 2007). The Centre for the Study of African Economies Working Paper Series. Working Paper 272. http://www.bepress.com/csae/paper272