How does risk management influence production decisions?
Subtitle: evidence from a field experiment
By: Shawn Cole, Xavier Gine, James Vickery
Contributors: Gine, Xavier, author; Vickery, James, author; Harvard Business School
Edition: Revised edition
Series: Working paper / Harvard Business School -- 13-080; Working paper (Harvard Business School) -- 13-080.
Publisher: Harvard Business School
Published: 2014
Place of publication: Boston ]
Language: eng
Number of pages: 38
Description: Weather is a key source of income risk, particularly in emerging market economies. This paper uses a randomized controlled trial involving a sample of Indian farmers to study how an innovative rainfall insurance product affects production decisions. We find that insurance provision induces farmers to shift production towards higher-return but higher-risk cash crops, particularly among educated farmers. Our results support the view that financial innovation can mitigate the real effects of uninsured production risk. Addressing the puzzle of low adoption, we show payouts improve trust in the product, and that farmers shield payouts from claims by relatives.
Notes: "March 2013. (Revised September 2014.)" -- Publisher's website.

Includes bibliographical references (pages 26-29).