Dual-Sided Balanced Insurance Market Stabilization

In Simple Words

Imagine a tug-of-war where giving a power-up to only the farmers pulls wage volatility wildly in one direction, while giving a power-up only to workers pulls it in the opposite direction. Giving matching power-ups to both sides at the same time balances the rope, keeping local pay steady during bad weather while raising overall village wages during bumper harvests.

Research question

Marketing weather insurance solely to landowning cultivators increases equilibrium wage volatility, while marketing insurance solely to wage laborers reduces labor supply during bad weather shocks. Unilateral interventions create distribution trade-offs between employers and workers.

Participants

N = 4,706 landless wage workers and 1,585 cultivator households across 42 rural villages in India.

Study Design

Structural simulation of village equilibrium log daily wages combining estimated cultivator labor demand elasticity (0.842) and laborer supply contraction (-0.627) under maximum sample coverage (25.6% cultivators, 31.8% laborers).

Results

Simultaneously marketing rainfall insurance to both cultivators and laborers eliminates excess wage volatility relative to a no-insurance baseline, while increasing average daily wages by 11.7% at median rainfall and by 19.0% at the 80th percentile of rainfall.

Takeaway

Market weather index insurance contracts simultaneously to both agricultural employer and laborer populations within the same local labor market.

Read alongside the research

Plain-English glossary

Original explanations, informed by the references below. Examples are illustrations, not data from the studies above. The research text stays unchanged.

Median

The middle number after arranging the values from smallest to largest. If there are two middle numbers, use their average.

ExampleFor the values 2, 4 and 12, the middle value is 4. The median is 4.

NIST · Measures of location ↗Read more about median →

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