Microinsurance, Trust and Economic Development: Evidence from a Randomized Natural Field Experiment
36 Pages Posted: 29 Sep 2009
There are 2 versions of this paper
Microinsurance, Trust and Economic Development: Evidence from a Randomized Natural Field Experiment
Microinsurance, Trust and Economic Development: Evidence from a Randomized Natural Field Experiment
Date Written: September 24, 2009
Abstract
We report results from a large randomized natural field experiment conducted in southwestern China in the context of insurance for sows. Our study sheds light on two important questions about microinsurance. First, how does access to formal insurance affect farmers' production decisions? Second, what explains the low takeup rate of formal insurance, despite substantial premium subsidy from the government? We find that providing access to formal insurance significantly increases farmers' tendency to raise sows. We argue that this finding also suggests that farmers are not previously insured efficiently through informal mechanisms. We also provide several pieces of evidence suggesting that trust, or lack thereof, for government-sponsored insurance products is a significant barrier for farmers' willingness to participate in the insurance program.
Keywords: Microinsurance, Trust, Natural Field Experiment
JEL Classification: C93, O12, O16
Suggested Citation: Suggested Citation
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