|
Working Paper
| HBS Working Paper Series
| 2009
Barriers to Household Risk Management: Evidence from India
by
Shawn A. Cole, Xavier Gine, Jeremy Tobacman, Robert Townsend, Petia Topalova and James Vickery
|
Abstract
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;
Insurance;
Risk Management;
Weather and Climate Change;
Technology Adoption;
India;
Citation:
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.)