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Extreme Weather Events, Agricultural Output, and Insurance: Evidence from South America
Author:
Juliette Caucheteux
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,
Jonas Nauerz
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, and
Svetlana Vtyurina
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Series:
IMF Working Papers
Volume/Issue:
Volume 2025: Issue 052
Language:
English
Publication Date:
07 Mar 2025
DOI:
https://doi.org/10.5089/9798229001991.001
ISBN:
9798229001991
ISSN:
1018-5941
Pages:
32
Keywords:
Agriculture; Productivity; NDVI; SPEI; Weather; Drought; Insurance; South America; weather event; soy output; loss from drought; benefits of insurance; NDVI in Brazil; Natural disasters; Agricultural sector; Agricultural production; Insurance companies; Caribbean
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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Extreme weather has profoundly affected countries across South America (SA), given the importance of the agricultural sector for the economies. However, these effects have not yet been properly measured. In our study, we construct a unique dataset of high-frequency satellite data on temperature, precipitation, and a Normalized Difference Vegetation Index (NDVI) that proxies the agricultural yield in selected countries. In particular, we then examine the effect of droughts on agricultural yields (soy output) and find that they have a significant negative impact and that there is heterogeneity in the response across countries. While insurance could help protect farmers against severe losses, coverage in the region is low, and barriers remain high. Building on existing literature and using a calibrated structural model, we highlight the benefits of insurance for Total Factor Productivity (TFP) and offer some recommendations for its expansion.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund