Working Paper: NBER ID: w15396
Authors: Hongbin Cai; Yuyu Chen; Hanming Fang; Lian Zhou
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; Economic Development; Field Experiment
JEL Codes: C93; O12; O16
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Trust in government-sponsored insurance products (G52) | Farmers' willingness to participate in insurance program (G52) |
| Instrumental variable (AHWs incentive schemes) (C36) | Access to formal insurance (G52) |
| Access to formal insurance (G52) | Farmers' tendency to raise sows (Q12) |
| Access to formal insurance (G52) | Farmers' production decisions (Q12) |