Working Paper Series

Group Insurance Against Common Shocks

Authors

  • Alain de Janvry, Goldman School of Public Policy, University of California, Berkeley
  • Vianney Dequiedt, CERDI, Universite d'Auvergne
  • Elisabeth Sadoulet, Agricultural and Resource Economics Department, UC Berkeley

History

  • Goldman School of Public Policy Working Paper (January 2011)

Abstract

We study insurance against common shocks in cooperatives and other productive
groups of individuals. In those groups, and due to strategic interactions among
group members, insurance decisions may be preferably taken at the group level
rather than the individual level. We highlight two kinds of potential problems with
individual insurance : the first one is a free-riding problem because due to strategic
interactions, insurance decisions exert a positive externality on other group members
; the second one is a coordination problem that occurs because it may be unpro table
for an individual to take insurance if the others in the group do not. Both types of
problems can be resolved if insurance is o ered at the group level.

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