The Impact of Insurance Provision on Household Production and Financial Decisions

Jing Cai

American Economic Journal: Economic Policy, 2016, vol. 8, issue 2, 44-88

Abstract: This paper uses a natural experiment to study the impact of an agricultural insurance program on household production, borrowing, and saving behavior. The empirical strategy includes difference-in-differences and triple difference estimations. The results show that insurance provision increases the insured crop production by 16 percent and raises borrowing by 29 percent. Interestingly, it does not affect total household savings; however, it does affect the relative proportion of flexible-term savings. Furthermore, effects on production and savings persist in the long run, while effects on borrowing are significant in only the medium run. Lastly, calibration results suggest that the policy is both welfare improving and cost-effective. (JEL D13, D14, G22, O16, P32, P36, Q12)

JEL-codes: D13 D14 G22 O16 P32 P36 Q12 (search for similar items in EconPapers)
Date: 2016
Note: DOI: 10.1257/pol.20130371
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Citations: View citations in EconPapers (63)

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Working Paper: The Impact of Insurance Provision on Households’ Production and Financial Decisions (2013)
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