2013
DOI: 10.1257/app.5.1.104
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Barriers to Household Risk Management: Evidence from India

Abstract: 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… Show more

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Cited by 386 publications
(183 citation statements)
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“…Poor households may lack information on the benefits and durability of the product (Conley and Udry, 2001;Feder and Slade, 1984;Giné and Yang, 2009). Consumers may also be liquidity-or creditconstrained (Cole et al, 2013;Giné et al, 2008;Tarozzi et al, 2014). In this section we first model how poor information affects willingness to pay and then model how liquidity constraints affect willingness to pay.…”
Section: Theory and Related Literaturementioning
confidence: 99%
“…Poor households may lack information on the benefits and durability of the product (Conley and Udry, 2001;Feder and Slade, 1984;Giné and Yang, 2009). Consumers may also be liquidity-or creditconstrained (Cole et al, 2013;Giné et al, 2008;Tarozzi et al, 2014). In this section we first model how poor information affects willingness to pay and then model how liquidity constraints affect willingness to pay.…”
Section: Theory and Related Literaturementioning
confidence: 99%
“…For example, people who lack access to proper tools to manage natural risk tend to spread risk over a large array of lower-risk activities and to reduce their investments, thereby reducing returns to assets and income. Smallholders plant low-return, low-risk crops and limit their investment in fertilizers to reduce their exposure to risk (Cole et al 2013). In rural Zimbabwe, farmers who are exposed to risk own on average half as much capital as farmers who are not exposed (Elbers et al 2007).…”
Section: Introductionmentioning
confidence: 99%
“…Examples of such benefits include: promoting international trade in areas with low transportation costs but exposed to flood risks (e.g., Gallup et al 1998); generating agglomeration externalities in cities (Ciccone and Hall 1996;Ciccone 2002;World Bank 2008); generating environmental amenities (e.g., from sea views) and revenues from tourism. And increased exposure to risk can be an unavoidable by-product of productive investments (e.g., Cole et al 2013;Elbers et al 2007). …”
Section: Introductionmentioning
confidence: 99%
“…Weather index insurance was first offered in the early 2000s, and it is now marketed to individual farmers in over fifteen countries. Randomized evaluations in Ethiopia in 2010 [1] and 2011 [2], Ghana [3], Andhra Pradesh, India in 2006 [4] and 2009 [5], Andhra Pradesh, Tamil Nadu, and Uttar Pradesh, India [6], Gujarat, India in 2007 [4] and 2009 [7], and Malawi [8] tested take-up of weather index insurance products. Three of these also measured the effects on agricultural production decisions [3] [5] [6].…”
mentioning
confidence: 99%
“…Below threshold (2), corresponding to total crop failure, farmers receive a lump-sum payment. The products tested in three of the featured evaluations [4] [5] [8] follow this schedule, with exact thresholds and payouts varying by location.…”
mentioning
confidence: 99%