Barriers to Household Risk Management: Evidence from India
Why do many households remain exposed to large exogenoussources 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. We find demand is signif...
| Main Authors: | , , , , , |
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| Other Authors: | |
| Format: | Article |
| Language: | en_US |
| Published: |
Taylor & Francis Group
2012
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| Online Access: | http://hdl.handle.net/1721.1/73597 https://orcid.org/0000-0002-1528-8102 |
| Summary: | Why do many households remain exposed to large exogenoussources 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. We find demand is significantly price-elastic, but that even if
insurance were offered with payout ratios similar to US, widespread coverage would not
be achieved. We then identify key non-price frictions that limit demand: liquidity
constraints, particularly among poor households, lack of trust, and limited salience. We
suggest potential improvements in contract design to mitigate these frictions. |
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