Barriers to household risk management [electronic resource] : Evidence from India / Shawn Cole
Material type:
TextPublication details: Washington, D.C., The World Bank, 2010Description: 1 online resource (40 p.)Subject(s): Access to Finance | Consumer Finance | Debt Markets | Economic Development | Emerging Markets | Financial Literacy | Insurance | Labor Policies | Liquidity Constraints | Rural Development | TrustAdditional physical formats: Cole, Shawn.: Barriers to household risk management.Online resources: Click here to access online 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.
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.
There are no comments on this title.