In Simple Words
Imagine a day-laborer who relies on picking crops to buy food. When a severe drought strikes, farm jobs vanish and wages crash. If the laborer bought an index insurance policy that pays out cash directly when the monsoon is delayed, that payout replaces lost wages. Because the worker now has emergency cash, there is less need to compete desperately for scarce farm work, leading the laborer to work fewer days or temporarily leave the labor market.
Landless workers in payout villages
- Not offered insurance
- Comparison group
- Offered insurance
- Estimated 15.4 fewer work days
Workers aged 25–49, 2011 growing season. At median rainfall in payout villages; estimate statistically uncertain, not proven zero.
See source →Research question
Landless agricultural laborers face severe earnings vulnerability during drought shocks because earnings depend entirely on local agricultural labor demand. When rainfall insurance payouts compensate laborers during bad weather realizations, the resulting income effect alters agricultural labor market participation and hours worked.
Participants
N = 3,678 landless agricultural wage workers aged 25-49 across rural Indian villages (515 in payout villages, 2,932 in non-payout villages).
Study Design
Clustered RCT measuring labor force participation and total days worked following randomized delayed-monsoon index insurance offers and subsequent indemnification payouts (Rs. 300 to Rs. 1,200 per unit).
Results
In villages experiencing delayed monsoon payouts, receiving an insurance payout lowered labor force participation by 28.5 percentage points (t-stat = -1.635) and reduced harvest labor supply by 15.44 days (t-stat = -1.391) at median rainfall deficiency.
Takeaway
Market rainfall index insurance directly to landless wage laborers to allow households to maintain consumption during climate shocks without supplying distress labor.
Source and citation
See source →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 →- Percentage points
The difference between two percentages.
ExampleA rise from 40% to 50% is 10 percentage points. Relative to the starting value, that is a 25% increase.
Office for National Statistics · Percentages ↗Read more about percentage points →- Randomized controlled trial
A study that uses chance, like drawing lots, to decide who receives each option being compared. Researchers compare the groups’ outcomes to estimate the effect of those options.
ExampleA lottery assigns volunteers to a training programme or a comparison group. Researchers then compare their outcomes.
GET-IT glossary · Randomized study ↗Read more about randomized controlled trial →