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Subsidy policies and insurance demand

J Cai, A de Janvry and E Sadoulet

Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series from Department of Agricultural & Resource Economics, UC Berkeley

Abstract: Using data from a two-year pricing experiment, we study the impact of subsidy policies on weather insurance take-up. Results show that subsidies increase future insurance take-up through their influence on payout experiences. Exploring mechanisms of the payout effect, we find that for households that randomly benefited from financial education, receiving a payout provides a one-time learning experience that improves take-up permanently. In contrast, households with poor insurance knowledge continuously update take-up decisions based on recent experiences with disasters and payouts. Combining subsidy policies with financial education can thus be effective in promoting long-run insurance adoption.

Keywords: Economics; Commerce; Management; Tourism and Services; Commerce; Management; Tourism and Services (search for similar items in EconPapers)
Date: 2020-08-01
New Economics Papers: this item is included in nep-fle and nep-ias
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