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 and Medardo Restrepo

Working papers from Red Investigadores de Economía

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. Voucher take-up rates go from 32% to 56%, from the least to the more generous voucher. In a sample of undergrad students from the same region, take-up rates went from 17% to 33%. We find that voucher redemption costs explain take-up among students but not among rural workers. Being a rural worker with land, and receiving government subsidies in cash, predict a higher voucher take-up.

Keywords: agriculture; dual labor market; informal labor market (search for similar items in EconPapers)
JEL-codes: C91 O17 R51 (search for similar items in EconPapers)
Pages: 30
Date: 2022-03
New Economics Papers: this item is included in nep-ban, 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:rie:riecdt:88

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