Health and skill formation in early childhood

Lorenzo Casaburi and Jack Willis

No 18, UBSCENTER - Working Papers from UBS International Center of Economics in Society - Department of Economics - University of Zurich

Abstract: The gains from insurance arise from the transfer of income across states. Yet, by requiring that the premium be paid upfront, standard insurance products also transfer income across time. We show that this intertemporal transfer can help explain low insurance demand, especially among the poor, and in a randomized control trial in Kenya we test a crop insurance product which removes it. The product is interlinked with a contract farming scheme: as with other inputs, the buyer of the crop offers the insurance and deducts the premium from farmer revenues at harvest time. The take-up rate is 72%, compared to 5% for the standard upfront contract, and take-up is highest among poorer farmers. Additional experiments and outcomes indicate that liquidity constraints, present bias, and counterparty risk are all important constraints on the demand for standard insurance. Finally, evidence from a natural experiment in the United States, exploiting a change in the timing of the premium payment for Federal Crop Insurance, shows that the transfer across time also affects insurance adoption in developed countries.

Keywords: Insurance; income transfer; development economics; contract farming (search for similar items in EconPapers)
JEL-codes: D81 O13 O55 (search for similar items in EconPapers)
Date: 2016-12
New Economics Papers: this item is included in nep-agr, nep-hea and nep-ias
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Persistent link: https://EconPapers.repec.org/RePEc:zur:uceswp:018

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