Barriers to Household Risk Management: Evidence from India

By Shawn Cole, X. Giné, Jeremy Tobacman, Robert M. Townsend, P. Topalova, James Vickery. American Economic Journal: Applied Economics, 2010

863 citations recorded by the source corpus.

Why do many households remain exposed to large exogenous sources of non-systematic income risk? We use a series of randomized field experiments in rural India to test the importance of price and non-price factors in the adoption of an innovative rainfall insurance product. Demand is significantly price sensitive, but widespread take-up would not be achieved even if the product offered a payout ratio comparable to U.S. insurance contracts. We present evidence suggesting that lack of trust, liquidity constraints and limited salience are significant non-price frictions that constrain demand. We suggest contract design improvements to mitigate these frictions.

Subfields: Accounting, Economics and Econometrics, Soil Science

View Paper: https://www.semanticscholar.org/paper/f143f4e8472e2012ba4a89c1d7efe8c2ad51ead9

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Citations in the corpus

Selling Formal Insurance to the Informally Insured (2012, background): “However, the existing evidence indicates that take-up rates for index insurance products are extremely low even when actuarially-fair rainfall insurance contracts are offered (Cole et al., 2009).”
The Demand for Microinsurance: A Literature Review (2017, methodology): “As regards the traditional method, Cole et al. (2011a) randomly assign households to a visit from an insurance educator at home and find that receiving a visit induces a significant increase in the take up rate by 20-25 pecentage points as compared to those households who only received flyers about ”
Banking on Trust: How Debit Cards Enable the Poor to Save More (2017, background): “While studies have explored the role of trust in stock market participation, use of checks instead of cash, and take-up of insurance products (Guiso, Sapienza and Zingales, 2004, 2008; Cole et al., 2013), studies that rigorously explore the role of trust in banks as a barrier to saving are scarce (K”
The Impact of Insurance Provision on Household Production and Financial Decisions (2016, background): “6%) of a rainfall insurance policy among farmers in rural India in 2004, while Cole et al. (2011) found an adoption rate of 5% - 10% of a similar insurance policy in two regions of India in 2006 2RCC is the most important financial institution in rural China.”
Time to Change What to Sow: Risk Preferences and Technology Adoption Decisions of Cotton Farmers in China (2013, background): “25 Various empirical studies such as Bellemare (2009), Cole et al. (2009), and Lybbert and Just (2007) have shown the importance of subjective expectation when farmers make farming decisions. as 1 yuan per hectare and the cost of Bt cotton seeds (per hectare) is CBT yuan.26 The cost of traditional…”
After the Drought: The Impact of Microinsurance on Consumption Smoothing and Asset Protection (2013, positive): “Other research has shown that barriers to the uptake of index insurance in similar contexts are often nonprice factors including trust and understanding of the contract, risk aversion, wealth and financial liquidity, and access to informal risk sharing networks, rather than heterogeneous willingness”
Temperature and Human Capital in India (2020, neutral): “…tasks in hot environments make more errors than soldiers in cooler conditions (Fine and Kobrick, 1978; Froom 5See for example, Burgess et al., 2017; Cole et al., 2013; Deaton, 1997; Dercon, 2005; Dercon and Krishnan, 2000; Paxson, 1993; Rosenzweig and Wolpin, 1993; Rosenzweig and Stark, 1989;…”