The trade-off between liquidity and insurance: voucher payments in a lab-in-the-field experiment with Colombian rural workers

Alexander Cano, Darwin Cortés, César Mantilla, Laura Prada-Medina and Medardo Restrepo

No 8ft4e, OSF Preprints from Center for Open Science

Abstract: We conduct a lab-in-the-field experiment in which 214 rural workers must choose between a cash or a voucher payment for completing a real-effort task. Participants face a twenty-percent chance of suffering a negative shock that will reduce their cash payment by roughly two-thirds. Opting for the voucher reduces the likelihood of the shock by one-half. We employ a multiple-price list with a varying voucher payment and a fixed cash payment to study this trade-off relevant for expanding the coverage and contributions of rural labor formalization. We find that take-up rates go from 32\% to 56\%, from the least to the more generous voucher. In a reference sample of undergrad students from the same region, take-up rates went from 17\% to 33\%. Voucher redemption costs are exogenously manipulated by randomly assigning the show-up fee in cash or vouchers. Lower redemption costs induce a higher voucher take-up, but only among students. Being a rural worker with land, and receiving government subsidies in cash, predict a higher voucher take-up.

Date: 2022-03-07
New Economics Papers: this item is included in nep-exp and nep-iue
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Working Paper: The trade-off between liquidity and insurance: voucher payments in a lab-in-the-field experiment with Colombian rural workers (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:osf:osfxxx:8ft4e

DOI: 10.31219/osf.io/8ft4e

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