Barriers to household risk management
Subtitle: evidence from India
By: Shawn Cole, Xavier Giné, Jeremy Tobacman, Petia Topalova, Robert Townsend, James Vickery
Contributors: Gine, Xavier; Harvard Business School
Edition: 2nd rev.
Series: Working paper / Harvard Business School -- 09-116; Working paper (Harvard Business School) -- 09-116.
Publisher: Harvard Business School
Published: 2011
Place of publication: [Boston]
Language: eng
Number of pages: 36
Description: Why do many households remain exposed to large exogenous sources 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. Demand is significantly price sensitive, but widespread take-up would not be achieved even if the product offered a payout ratio comparable to U.S. insurance contracts. We present evidence suggesting that lack of trust, liquidity constraints and limited salience are significant non-price frictions that constrain demand. We suggest contract design improvements to mitigate these frictions.
Notes: "April 2009, revised November 2010, April 2012" -- Publisher's website.

Includes bibliographical references.