Cole, ShawnGiné, XavierTobacman, JeremyTopalova, PetiaTownsend, RobertVickery, James2012-03-192012-03-192010-12-01https://hdl.handle.net/10986/3987Why 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.CC BY 3.0 IGOACCESS TO FINANCEACCESS TO FINANCIAL SERVICESADMINISTRATIVE DATAADMINISTRATIVE RECORDSADVERSE SELECTIONAGRICULTURAL ECONOMICSASSET HOLDINGSASSET MARKETSASSET SALESASYMMETRIC INFORMATIONBEHAVIORAL ECONOMICSBIASESBORROWINGBUSINESS SCHOOLCASH ON HANDCOLLATERALCOMMODITYCOMMODITY PRICECOMMODITY RISK MANAGEMENTCOMMUNITY GROUPSCONSUMERCONSUMER CREDITCONSUMER DURABLESCONSUMER FINANCECONSUMERSCONSUMPTION EXPENDITURESCONSUMPTION SMOOTHINGCONTRACT DESIGNCONTRIBUTIONCONTRIBUTIONSCOUPONCOUPONSCREDIT CONSTRAINTSCREDIT EXPANSIONCREDIT REGISTRIESCROP FAILUREDAILY WAGEDEBTDEBT CAPACITYDEMOGRAPHICDEMOGRAPHIC CHARACTERISTICSDEPOSITSDERIVATIVESDERIVATIVES MARKETSDEVELOPING COUNTRIESDEVELOPMENT ECONOMICSDISABILITYDISBURSEMENTDISCOUNT RATEDISCOUNT RATESDIVERSIFICATIONDROUGHTDROUGHTSDUMMY VARIABLEDUMMY VARIABLESDURABLEDURABLE GOODSECONOMIC DEVELOPMENTECONOMIC RISKSEDUCATION LEVELEDUCATION LEVELSEMERGING MARKETEMERGING MARKET ECONOMIESEMERGING MARKETSEMPLOYEEEXCHANGE RATEEXOGENOUS INCOMEEXPENDITUREEXPOSURE TO RISKFARMERFARMERSFEDERAL RESERVEFEDERAL RESERVE BANKFEDERAL RESERVE SYSTEMFINANCIAL CONSTRAINTSFINANCIAL CONTRACTFINANCIAL DECISIONFINANCIAL EDUCATIONFINANCIAL EDUCATION PROGRAMFINANCIAL INNOVATIONFINANCIAL INNOVATIONSFINANCIAL LITERACYFINANCIAL MARKETFINANCIAL MARKETSFINANCIAL PRODUCTSFINANCIAL QUESTIONSFINANCIAL SERVICESFINANCIAL STUDIESFINANCIAL SUPPORTFINANCIAL SYSTEMFINANCIAL SYSTEMSFUTURESGENDERGENERAL POPULATIONGOVERNMENT SUBSIDIESHOMEOWNERHOMEOWNERSHOMEOWNERS INSURANCEHOUSEHOLD FINANCEHOUSEHOLD INCOMEHOUSEHOLD WEALTHHOUSEHOLDSIMPERFECT INFORMATIONINCOMEINCOME SMOOTHINGINCOME VARIABILITYINCOMESINSURANCEINSURANCE COMPANIESINSURANCE COMPANYINSURANCE INDUSTRYINSURANCE MARKETINSURANCE MARKETSINSURANCE POLICIESINSURANCE POLICYINSURANCE PREMIUMSINSURANCE PRODUCTINSURANCE PRODUCTSINSURERINTEREST RATEINTEREST RATESINTERNATIONAL BANKINVENTORYLABORERSLAND HOLDINGSLANDOWNERLEGAL PROTECTIONSLENDERLEVEL OF EDUCATIONLEVELS OF RISKLIABILITYLIFE INSURANCELIMITED ACCESSLIMITED FINANCIAL LITERACYLIMITED LIABILITYLIQUID ASSETSLIQUIDITYLIQUIDITY CONSTRAINTSLOANLOANS FOR FARMERSLONG-TERM CARELONG-TERM CARE INSURANCELOW INCOMELOWER INCOMEMARGINAL UTILITY OF CONSUMPTIONMARKET COMPETITIONMARKET ECONOMIESMARKET FAILUREMARKET PORTFOLIOMARKETINGMARKETING EFFORTMATHMATHEMATICSMICRO-INSURANCEMICROFINANCEMICROFINANCE INSTITUTIONMICROFINANCE INSTITUTIONSMICROFINANCE LOANSMICROINSURANCEMONETARY FUNDMORAL HAZARDMORTGAGEMORTGAGE CHOICEOPERATING COSTSPAYOUT RATIOPAYOUT RATIOSPENETRATION RATEPENSIONPOLITICAL ECONOMYPORTFOLIOPRICE INDICESPRICE INSURANCEPRICE SENSITIVITYPRIVATE SECTOR DEVELOPMENTPROBABILITIESPROBABILITYPROFITABILITYPROSPERITYPURCHASESRATE OF RETURNREMITTANCESREPAYMENTREPAYMENTSREPUTATIONRESEARCH ASSISTANCERESERVE BANKRESOURCE ALLOCATIONRETIREMENTRETIREMENT SECURITYRETURNSRISK AVERSIONRISK DIVERSIFICATIONRISK EXPOSURERISK MANAGEMENTRISK POOLINGRISK SHARINGRURAL FINANCESAFETYSALESSAVINGSSAVINGS ACCOUNTSAVINGS DEPOSITSSECONDARY SCHOOLSERIAL NUMBERSKILLED WORKERSSMART MONEYSOCIAL COLLATERALSOURCES OF INCOMESTOCK MARKETSUPPLIERSTAKE-UP RATETAKE-UP RATESTECHNICAL SUPPORTTECHNOLOGICAL ADVANCESTRACK RECORDTRANSACTIONS COSTSTRANSITORY INCOMEVALUABLEVALUE OF SAVINGSVILLAGEVILLAGESVOLATILITYWELFARE BENEFITSWORTHWorld Bank10.1596/1813-9450-5504