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Barriers to Household Risk Management: Evidence from India (Cole S. A., Gine X., Tobacman J., Topalova P. B., Townsend R. M., Vickery J. I.)

Household Strategies Risk-taking and Risk Management

Abstract 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. We find that demand is significantly price sensitive, but even if insurance were offered with payout ratios similar to those in the United States, widespread coverage would not be achieved. We identify key non-price frictions that limit demand: lack of trust, liquidity constraints, particularly among poor households, and limited salience. We suggest potential improvements in contract design to mitigate these frictions.
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Libref/ Cole S. A., Gine X., Tobacman J., Topalova P. B., Townsend R. M., Vickery J. I. (2011) "Barriers to Household Risk Management: Evidence from India", Harvard Business School Finance Working Paper No. 09-116, pp. 1 - 49
© Программирование — Александр Красильников, 2008
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