Economics at your fingertips  

Time versus State in Insurance: Experimental Evidence from Contract Farming in Kenya

Lorenzo Casaburi and Jack Willis

American Economic Review, 2018, vol. 108, issue 12, 3778-3813

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 for pay-at-harvest insurance is 72 percent, compared to 5 percent for the standard pay-up-front contract, and the difference is largest among poorer farmers. Additional experiments and outcomes provide evidence on the role of liquidity constraints, present bias, and counterparty risk, and find that enabling farmers to commit to pay the premium just one month later increases demand by 21 percentage points.

JEL-codes: G22 I32 O13 O16 Q12 Q14 (search for similar items in EconPapers)
Date: 2018
Note: DOI: 10.1257/aer.20171526
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed

Downloads: (external link) (application/pdf) ... pyEycNXz5bHnP6fuBwM7 (application/zip) ... d5EDM4-wycYfOt5tyZcU (application/pdf) ... Ly9EkuVh1rlqJaG3y8pF (application/zip)
Access to full text is restricted to AEA members and institutional subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Ordering information: This journal article can be ordered from

Access Statistics for this article

American Economic Review is currently edited by Esther Duflo

More articles in American Economic Review from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().

Page updated 2018-12-22
Handle: RePEc:aea:aecrev:v:108:y:2018:i:12:p:3778-3813