Barriers to Household Risk Management: Evidence from India

Robert Townsend, Shawn Cole, Jeremy Tobacman, Xavier Gine, James Vickery () and Petia Topalova

No 2012/195, IMF Working Papers from International Monetary Fund

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. 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.

Keywords: WP; Gujarat video experiment; product endorsement; financial product; insurance demand; expected return; Gujarat video treatment; payout slope; product diffusion; Insurance; Household Finance; Trust; Liquidity Constraints; Economic Development; Andhra Pradesh sample; Insurance companies; Consumption; Liquidity; Africa (search for similar items in EconPapers)
Pages: 43
Date: 2012-07-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (96)

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Related works:
Journal Article: Barriers to Household Risk Management: Evidence from India (2013)
Working Paper: Barriers to Household Risk Management: Evidence from India (2011)
Working Paper: Barriers to household risk management: evidence from India (2010)
Working Paper: Barriers to household risk management: evidence from India (2009)
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