Publication: Social Networks, Financial Literacy and Index Insurance
Date
2013-01-25
ISSN
Published
2013-01-25
Author(s)
Abstract
The authors present a randomized field
experiment measuring the direct impact and social network
spillovers of providing financial literacy and discount
vouchers on farmers decision to purchase index-based
drought insurance. To examine this, the authors form
clusters by grouping together geographically proximate
households. Clusters were then randomly assigned to receive
either a high or low intensity of each of the following
treatments: financial literacy materials and discount
vouchers off the price of insurance. The authors find social
network spillovers to the provision of financial literacy
materials but no spillovers to the provision of discount
vouchers on farmers decision to purchase insurance.
Specifically, receiving financial literacy materials when
60% or more of their neighbors also receive financial
literacy materials, increases the likelihood that a farmer
will purchase insurance by 4.3 percent (s.e. 2.5 percent)
while receiving a financial literacy materials when 40
percent or fewer of their neighbors also receive financial
literacy materials, decreases the likelihood that a farmer
will purchase insurance by 2.6 percent (s.e. 2.5 percent).
Looking at the discount vouchers, we find significant own
effects of receiving discounts off the price of insurance on
farmers take-up decision but negligible social network
effects. Our results provide suggestive evidence that
financial literacy materials are efficacious in encouraging
take-up when farmers social contacts are similarly receive
access to financial literacy materials.
Citation
“Gine, Xavier; Karlan, Dean; Ngatia, Muthoni. 2013. Social Networks, Financial Literacy and Index Insurance. © World Bank, Washington, DC. http://openknowledge.worldbank.org/handle/10986/21814 License: CC BY 3.0 IGO.”