Microinsurance, Trust and Economic Development: Evidence from a Randomized Natural Field Experiment

Hongbin Cai (), Yuyu Chen (), Hanming Fang () and Zhou, Li-An ()
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Zhou, Li-An: Department of Applied Economics, Guanghua School of Management, Peking University

PIER Working Paper Archive from Penn Institute for Economic Research, Department of Economics, University of Pennsylvania

Abstract: We report results from a large randomized natural field experiment conducted in southwestern China in the context of insurance for sows. Our study sheds light on two important questions about microinsurance. First, how does access to formal insurance affect farmers' production decisions? Second, what explains the low takeup rate of formal insurance, despite substantial premium subsidy from the government? We find that providing access to formal insurance significantly increases farmers' tendency to raise sows. We argue that this finding also suggests that farmers are not previously insured efficiently through informal mechanisms. We also provide several pieces of evidence suggesting that trust, or lack thereof, for government-sponsored insurance products is a significant barrier for farmers' willingness to participate in the insurance program.

Keywords: Microinsurance; Trust, Natural Field Experiment (search for similar items in EconPapers)
JEL-codes: C93 O12 O16 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cna, nep-exp, nep-ias, nep-mfd and nep-tra
Date: 2009-09-24

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Working Paper: Microinsurance, Trust and Economic Development: Evidence from a Randomized Natural Field Experiment (2009)
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Persistent link: http://EconPapers.repec.org/RePEc:pen:papers:09-034

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