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Although weather shocks are a major source of income fluctuation, most of the world's poor lack insurance coverage against them. Absence of formal insurance contributes to poverty traps, as investment decisions are conflicted with risk management ones: risk-averse farmers tend to underinvest and produce lower yielding yet safer crops. In the past few years, weather index insurance has gained increasing attention as an effective tool to provide small-scale farmers coverage against aggregate shocks. However, there is little empirical evidence about its effectiveness. This paper studies the effect of the recently introduced rainfall-indexed insurance on farmers' productivity, risk management strategies, as well as per capita income and expenditure in Mexico. The identification strategy takes advantage of the variation across counties and across time in which the insurance was rolled-out. The analysis finds that the presence of insurance in treated counties has significant and positive effects on maize productivity. Similarly, there is a positive association between the presence of insurance in the municipality and rural households' per capita expenditure and income, although no significant relation is found between the presence of insurance and the number of hectares destined for maize production.

Administrative Costs --- Adverse Selection --- Agricultural Development --- Agricultural Insurance --- Agricultural Land --- Agricultural Policy --- Agricultural Production --- Agricultural Productivity --- Agricultural Technology --- Agriculture --- Basis Risk --- Beneficiaries --- Cash Crops --- Cash Transfer Programs --- Cash Transfers --- Checks --- Claims --- Communal Land --- Consumption Smoothing --- Contracts --- Counterfactual --- Covariate Shocks --- Coverage --- Credit --- Crop Insurance --- Crop Varieties --- Crops & Crop Management Systems --- Debt Markets --- Development Economics --- Drought --- Durable --- Durable Assets --- Economics --- Effects --- Efficiency --- Equity --- Exchange --- Expenditure --- Extreme Poverty --- Famine --- Farmers --- Female Labor --- Female Labor Force --- Finance and Financial Sector Development --- Financial Support --- Guarantee --- Household Head --- Household Income --- Household Survey --- Illiteracy --- Implicit Contracts --- Incentives --- Income --- Income Smoothing --- Indemnity --- Indemnity Payments --- Infant Mortality --- Information --- Insurance --- Insurance & Risk Mitigation --- Insurance Company --- Insurance Contracts --- Insurance Coverage --- Insurance Market --- Insurance Policies --- Insurance Premiums --- Insurance Product --- Insurances --- Insurers --- Interest --- International Bank --- Investment --- Investment Decisions --- Irrigation --- Labor --- Labor Force --- Labor Policies --- Lack of Infrastructure --- Land Quality --- Land Size --- Loans --- Loss --- Malnutrition --- Management --- Market --- Market Failures --- Measures --- Minimum Wages --- Moral Hazard --- Mortality --- Organizations --- Outcomes --- Policies --- Policyholders --- Political Economy --- Poor --- Poor Rural Household --- Poverty --- Poverty Index --- Poverty Levels --- Poverty Reduction --- Premiums --- Private Insurance --- Private Insurance Companies --- Production --- Production of Cash Crops --- Productivity --- Productivity Growth --- Profit --- Programs --- Property Rights --- Rates --- Real Income --- Reinsurance --- Reinsurance Markets --- Rights --- Risk --- Risk Exposure --- Risk Management --- Risk Management Strategies --- Risk Sharing --- Risk Sharing Arrangements --- Risk Taking --- Risk Transfer --- Risks --- Running Water --- Rural --- Rural Areas --- Rural Household --- Rural Level --- Rural Population --- Rural Poverty --- Rural Poverty Reduction --- Rural Settings --- Social Protections and Labor --- Standards --- Supply --- Theory --- Training --- Transfer Programs --- Transfers --- Value --- Wages