Barriers to Household Risk Management: Evidence from India

40 Pages Posted: 20 Apr 2016

See all articles by Shawn Allen Cole

Shawn Allen Cole

Harvard Business School

Xavier Giné

World Bank - Development Research Group (DECRG)

Jeremy Tobacman

Alfred Lerner College of Business and Economics, University of Delaware

Petia B. Topalova

International Monetary Fund (IMF)

Robert M. Townsend

Massachusetts Institute of Technology (MIT)

James I. Vickery

Federal Reserve Bank of Philadelphia

Multiple version iconThere are 3 versions of this paper

Date Written: December 1, 2010

Abstract

Why 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.

Keywords: Financial Literacy, Debt Markets, Access to Finance, Emerging Markets, Labor Policies

Suggested Citation

Cole, Shawn Allen and Gine, Xavier and Tobacman, Jeremy and Topalova, Petia B. and Townsend, Robert M. and Vickery, James Ian, Barriers to Household Risk Management: Evidence from India (December 1, 2010). World Bank Policy Research Working Paper No. 5504, Available at SSRN: https://ssrn.com/abstract=1726253

Shawn Allen Cole (Contact Author)

Harvard Business School ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States

Xavier Gine

World Bank - Development Research Group (DECRG) ( email )

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States

HOME PAGE: https://sites.google.com/site/decrgxaviergine/

Jeremy Tobacman

Alfred Lerner College of Business and Economics, University of Delaware ( email )

Newark, DE 19716
United States

Petia B. Topalova

International Monetary Fund (IMF) ( email )

700 19th Street N.W.
Washington, DC 20431
United States

Robert M. Townsend

Massachusetts Institute of Technology (MIT) ( email )

77 Massachusetts Avenue
50 Memorial Drive
Cambridge, MA 02139-4307
United States

James Ian Vickery

Federal Reserve Bank of Philadelphia ( email )

10 Independence Mall
Philadelphia, PA 19106
United States
+12155746549 (Phone)

HOME PAGE: http://www.vickeryjames.com

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
139
Abstract Views
3,651
Rank
19,585
PlumX Metrics