Working Paper: NBER ID: w22403
Authors: Jing Cai; Changcheng Song
Abstract: This study examines the effect of experience and knowledge on weather insurance adoption. First, we conduct insurance games with farmers, and find that the treatment improves real insurance take-up by 46%. The effect is not driven by changes in risk attitudes and perceived probability of disasters, or by learning of insurance benefits, but is driven by the experience acquired in the game. Second, we find that providing information about the payout probability has a strong positive effect on insurance take-up. Finally, when subjects receive both treatments, the probability information has a greater impact on take-up than does the disaster experience.
Keywords: insurance; disaster experience; knowledge; takeup decisions; randomized experiment
JEL Codes: D03; D14; G22; M31; O16; O33; Q12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Hypothetical Disaster Experience (H84) | Insurance Takeup (G52) |
| Insurance Game Participation (G22) | Risk Attitudes (D81) |
| Knowledge of Payout Probability (G35) | Risk Attitudes (D81) |
| Insurance Game Participation (G22) | Insurance Takeup (G52) |
| Knowledge of Payout Probability (G35) | Insurance Takeup (G52) |
| Timing of Experiences (C41) | Insurance Takeup (G52) |