How Does Risk Management Influence Production Decisions? Evidence From a Field Experiment

Xavier Gine, James Vickery and Shawn Cole
Additional contact information
Shawn Cole: Harvard Business School

No 676, 2013 Meeting Papers from Society for Economic Dynamics

Abstract: Rainfall variation and other weather shocks are a key source of risk for many firms and households, particularly in the developing world. We study how the availability of risk management instruments designed to hedge rainfall risk affects investment and production decisions of small- and medium-scale Indian farmers. We use a field experiment approach, involving randomized provision of rainfall insurance to farmers. While we find little effect on total expenditures, increased insurance induces farmers to substitute production activities towards high-return but higher-risk cash crops, consistent with theoretical predictions. Our results support the view that financial innovation may help ameliorate costs associated with weather variability and other types of risk.

Date: 2013
New Economics Papers: this item is included in nep-agr, nep-exp, nep-mfd and nep-rmg
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Citations: View citations in EconPapers (16)

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Related works:
Journal Article: How Does Risk Management Influence Production Decisions? Evidence from a Field Experiment (2017)
Working Paper: How does risk management influence production decisions? evidence from a field experiment (2014)
Working Paper: How does risk management influence production decisions? evidence from a field experiment (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed013:676

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