Publication: Barriers to Household Risk Management : Evidence from India
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2010-12-01
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2010-12-01
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Why do many households remain exposed to large exogenous sources of non-systematic income risk? This paper uses 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. The analysis finds that demand is significantly price-elastic, but that even if insurance were offered with payout ratios similar to US, widespread coverage would not be achieved. The paper identifies key non-price frictions that limit demand: liquidity constraints, particularly among poor households, lack of trust, and limited salience. The authors suggest potential improvements in contract design to mitigate these frictions.
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“Cole, Shawn; Giné, Xavier; Tobacman, Jeremy; Topalova, Petia; Townsend, Robert; Vickery, James. 2010. Barriers to Household Risk Management : Evidence from India. Policy Research working paper ; no. WPS 5504. © World Bank. http://hdl.handle.net/10986/3987 License: CC BY 3.0 IGO.”
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