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NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Publications by Sarah A. Janzen

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December 2013After the Drought: The Impact of Microinsurance on Consumption Smoothing and Asset Protection
with Michael R. Carter: w19702
To cope with shocks, poor households with inadequate access to financial markets can sell assets to smooth consumption and, or reduce consumption to protect assets. Both coping strategies can be economically costly and contribute to the intergenerational transmission of poverty, yet limited evidence exists regarding the effectiveness of insurance to mitigate these costs in risk-prone developing economies. Utilizing data from an RCT in Kenya, this paper estimates that on average an innovative microinsurance scheme reduces both forms of costly coping. Threshold econometrics grounded in theory reveal a more complex pattern: (i) wealthier households primarily cope by selling assets, and insurance makes them 96 percentage points less likely to sell assets following a shock; (ii) poorer househol...

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