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Barriers to household risk management: evidence from India

Shawn Cole, Xavier Gine (), Jeremy Tobacman, Petia Topalova, Robert Townsend and James Vickery ()

No 5504, Policy Research Working Paper Series from The World Bank

Abstract: Why do many households remain exposed to large exogenous sources of non-systematic income risk? This paper uses a series of randomized field experiments in rural India to test the importance of price and non-price factors in the adoption of an innovative rainfall insurance product. The analysis finds that demand is significantly price-elastic, but that even if insurance were offered with payout ratios similar to US, widespread coverage would not be achieved. The paper identifies key non-price frictions that limit demand: liquidity constraints, particularly among poor households, lack of trust, and limited salience. The authors suggest potential improvements in contract design to mitigate these frictions.

Keywords: Financial Literacy; Debt Markets; Access to Finance; Emerging Markets; Labor Policies (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dev, nep-exp and nep-mfd
Date: 2010-12-01
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Related works:
Journal Article: Barriers to Household Risk Management: Evidence from India (2013) Downloads
Working Paper: Barriers to Household Risk Management; Evidence from India (2012) Downloads
Working Paper: Barriers to Household Risk Management: Evidence from India (2011) Downloads
Working Paper: Barriers to household risk management: evidence from India (2009) Downloads
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