| HBS Working Paper Series
Barriers to Household Risk Management: Evidence from India
Why do many households remain exposed to large exogenous sources of non-systematic income risk? Why don't financial markets develop to pool these risks? This paper uses a series of randomized field experiments to test the importance of price and non-price factors in the adoption of an innovative rainfall insurance product, designed to hedge a major source of agricultural production risk. Demand is shown to be significantly price-sensitive, with a price elasticity between -0.66 and -0.88. However, non-price frictions, such as liquidity constraints and limited trust in the insurance provider, are also found to be important in explaining limited insurance take-up.
Keywords: Household Characteristics;
Weather and Climate Change;
Cole, Shawn A., Xavier Gine, Jeremy Tobacman, Robert Townsend, Petia Topalova, and James Vickery. "Barriers to Household Risk Management: Evidence from India." Harvard Business School Working Paper, No. 09–116, April 2009. (Revised November 2010, April 2012.)