Groh, MatthewMcKenzie, David2014-10-062014-10-062014-09https://hdl.handle.net/10986/20368Firms in many developing countries cite macroeconomic instability and political uncertainty as major constraints to their growth. Economic theory suggests uncertainty can cause firms to delay investments until uncertainty is resolved. A randomized experiment was conducted in post-revolution Egypt to measure the impact of insuring microenterprises against macroeconomic and political uncertainty. Demand for macroeconomic shock insurance was high; 36.7 percent of microentrepreneurs in the treatment group purchased insurance. However, purchasing insurance does not change the likelihood that a business takes a new loan, the size of the loan, or how the loan is invested. This lack of effect is attributed to microenterprises largely investing in inventories and raw materials rather than irreversible investments like equipment. These results suggest that, contrary to what some firms profess, macroeconomic and political risk is not inhibiting the investment behavior of microenterprises. However, insurance may still be of value to help firms cope with shocks when they do occur, but the paper is unable to examine this dimension, because the insurance product did not pay out over the course of the pilot.en-USCC BY 3.0 IGOACCESS TO FINANCEACCESS TO FINANCINGACCOUNTINGACTUARIALLY FAIR INSURANCEAMOUNT OF LOANAPRASSETSBANK LOANBANK POLICYBANKING LAWSBANKSBORROWINGBUSINESS ACTIVITYBUSINESS ASSOCIATIONBUSINESS OWNERBUSINESS OWNERSBUSINESS RISKCAPITAL INVESTMENTSCAPITAL STOCKCASH FLOWCASH ON HANDCHECKSCONSUMERSCORRUPTIONCREDIT OFFICERCURRENCYDEBTDEVELOPING COUNTRIESDEVELOPMENT ECONOMICSDISCOUNT RATEDUMMY VARIABLEECONOMIC THEORYEDUCATION LEVELSELIGIBILITY CRITERIAEMERGENCY LOANEMPLOYEEEQUALITYEQUIPMENTEQUIPMENT PURCHASESEXCHANGE RATEFAIR PRICEFINANCIAL CRISISFINANCIAL LITERACYFIRE INSURANCEFIRM PERFORMANCEGASOLINE PRICESGENDERGOVERNMENT SUBSIDIESGREATER ACCESSGROUP LOANHEALTH INSURANCEHOUSEHOLD CONSUMPTIONHOUSEHOLDSHUMAN CAPITALINCOMEINDIVIDUAL LOANSINFLATIONINSTALLMENTINSTALLMENTSINSURANCEINSURANCE AGENCYINSURANCE COVERAGEINSURANCE MARKETSINSURANCE PAYMENTSINSURANCE PAYOUTINSURANCE PENETRATIONINSURANCE POLICYINSURANCE PREMIUMINSURANCE PRODUCTINSURANCE PRODUCTSINSURANCE PROGRAMINSURANCE SERVICESINTEREST PAYMENTINTEREST RATEINTERNATIONAL BANKINVENTORIESINVENTORYINVESTINGINVESTMENT ACTIVITIESINVESTMENT BEHAVIORINVESTMENT CLIMATEINVESTMENT DECISIONSINVESTMENT OPPORTUNITIESLACK OF KNOWLEDGELEGAL SYSTEMLIFE INSURANCELIFE INSURANCE PREMIUMSLIQUIDITYLOANLOAN AMOUNTLOAN AMOUNTSLOAN OFFICERLOAN OFFICERSLOAN PERIODLOAN PRINCIPALLOAN PROGRAMLOAN SIZELOAN SIZESLONG-TERM INVESTMENTSMACROECONOMIC INSTABILITYMACROECONOMIC RISKSMACROECONOMIC UNCERTAINTYMARGINAL COEFFICIENTSMARKET PRICESMEDIAN FIRMMFISMICROENTERPRISESMICROFINANCEMICROFINANCE INSTITUTIONMICROFINANCE INSTITUTIONSMICROFINANCE LOANMICROFINANCE LOANSNEED FOR CREDITNEGOTIATIONSNEW MARKETPOLICY ANALYSISPOLITICAL RISKPOLITICAL RISKSPOLITICAL UNCERTAINTYPORTFOLIOSPRINCIPAL PAYMENTPROFITABILITYPUBLIC POLICYREFERENDUMREGULATORY CONSTRAINTSREGULATORY POLICYREPAYMENTRESERVESRETURNRETURNSRISK AVERSIONRISK MANAGEMENTRISK OF DEFAULTSRISK SHARINGSAVINGSSET ASIDESMALL BUSINESSSMALL BUSINESS OWNERSSMALL ENTERPRISESSOCIAL FUNDSOURCES OF FINANCESTOCK EXCHANGESTOCK MARKETSUBSISTENCE FARMERSSUBSTITUTIONTAXTAX RATESTELECOMMUNICATIONSTRUST FUNDSVILLAGESWEATHER INSURANCEWORKING CAPITAL10.1596/1813-9450-7048