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The effect of weather index insurance on social capital: Experimental evidence from Ethiopia

Halefom Nigus (), Eleonora Nillesen () and Pierre Mohnen ()
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Halefom Nigus: UNU-MERIT
Eleonora Nillesen: UNU-MERIT

No 7, MERIT Working Papers from United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT)

Abstract: In this study, using data from lab-in-the-field experiment, we explore whether the introduction of weather index insurance crowds in or crowds out social capital in northern Ethiopia. We use contributions in the public good game as a measure of social capital. We find that weather index insurance crowds out social capital. The free-riding problem created by the positive externality of weather index insurance and development of self-sufficiency behaviour are found to be the causal mechanisms behind the crowding out phenomenon. Our results indicate that formal insurance mechanisms do not occur in a vacuum and may have unintended effects. Hence, this study suggests that novel insurance product design and marketing strategies should be used to ameliorate such unintended effects.

Keywords: Weather index insurance; social capital; public goods game; Ethiopia (search for similar items in EconPapers)
JEL-codes: C93 G22 H41 O17 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-afr, nep-agr, nep-exp, nep-ias, nep-mfd and nep-soc
Date: 2018-02-19
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Persistent link: https://EconPapers.repec.org/RePEc:unm:unumer:2018007

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