Barriers to Household Risk Management : Evidence from India
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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.
Palabras clave
ACCESS TO FINANCE, ACCESS TO FINANCIAL SERVICES, ADMINISTRATIVE DATA, ADMINISTRATIVE RECORDS, ADVERSE SELECTION, AGRICULTURAL ECONOMICS, ASSET HOLDINGS, ASSET MARKETS, ASSET SALES, ASYMMETRIC INFORMATION, BEHAVIORAL ECONOMICS, BIASES, BORROWING, BUSINESS SCHOOL, CASH ON HAND, COLLATERAL, COMMODITY, COMMODITY PRICE, COMMODITY RISK MANAGEMENT, COMMUNITY GROUPS, CONSUMER, CONSUMER CREDIT, CONSUMER DURABLES, CONSUMER FINANCE, CONSUMERS, CONSUMPTION EXPENDITURES, CONSUMPTION SMOOTHING, CONTRACT DESIGN, CONTRIBUTION, CONTRIBUTIONS, COUPON, COUPONS, CREDIT CONSTRAINTS, CREDIT EXPANSION, CREDIT REGISTRIES, CROP FAILURE, DAILY WAGE, DEBT, DEBT CAPACITY, DEMOGRAPHIC, DEMOGRAPHIC CHARACTERISTICS, DEPOSITS, DERIVATIVES, DERIVATIVES MARKETS, DEVELOPING COUNTRIES, DEVELOPMENT ECONOMICS, DISABILITY, DISBURSEMENT, DISCOUNT RATE, DISCOUNT RATES, DIVERSIFICATION, DROUGHT, DROUGHTS, DUMMY VARIABLE, DUMMY VARIABLES, DURABLE, DURABLE GOODS, ECONOMIC DEVELOPMENT, ECONOMIC RISKS, EDUCATION LEVEL, EDUCATION LEVELS, EMERGING MARKET, EMERGING MARKET ECONOMIES, EMERGING MARKETS, EMPLOYEE, EXCHANGE RATE, EXOGENOUS INCOME, EXPENDITURE, EXPOSURE TO RISK, FARMER, FARMERS, FEDERAL RESERVE, FEDERAL RESERVE BANK, FEDERAL RESERVE SYSTEM, FINANCIAL CONSTRAINTS, FINANCIAL CONTRACT, FINANCIAL DECISION, FINANCIAL EDUCATION, FINANCIAL EDUCATION PROGRAM, FINANCIAL INNOVATION, FINANCIAL INNOVATIONS, FINANCIAL LITERACY, FINANCIAL MARKET, FINANCIAL MARKETS, FINANCIAL PRODUCTS, FINANCIAL QUESTIONS, FINANCIAL SERVICES, FINANCIAL STUDIES, FINANCIAL SUPPORT, FINANCIAL SYSTEM, FINANCIAL SYSTEMS, FUTURES, GENDER, GENERAL POPULATION, GOVERNMENT SUBSIDIES, HOMEOWNER, HOMEOWNERS, HOMEOWNERS INSURANCE, HOUSEHOLD FINANCE, HOUSEHOLD INCOME, HOUSEHOLD WEALTH, HOUSEHOLDS, IMPERFECT INFORMATION, INCOME, INCOME SMOOTHING, INCOME VARIABILITY, INCOMES, INSURANCE, INSURANCE COMPANIES, INSURANCE COMPANY, INSURANCE INDUSTRY, INSURANCE MARKET, INSURANCE MARKETS, INSURANCE POLICIES, INSURANCE POLICY, INSURANCE PREMIUMS, INSURANCE PRODUCT, INSURANCE PRODUCTS, INSURER, INTEREST RATE, INTEREST RATES, INTERNATIONAL BANK, INVENTORY, LABORERS, LAND HOLDINGS, LANDOWNER, LEGAL PROTECTIONS, LENDER, LEVEL OF EDUCATION, LEVELS OF RISK, LIABILITY, LIFE INSURANCE, LIMITED ACCESS, LIMITED FINANCIAL LITERACY, LIMITED LIABILITY, LIQUID ASSETS, LIQUIDITY, LIQUIDITY CONSTRAINTS, LOAN, LOANS FOR FARMERS, LONG-TERM CARE, LONG-TERM CARE INSURANCE, LOW INCOME, LOWER INCOME, MARGINAL UTILITY OF CONSUMPTION, MARKET COMPETITION, MARKET ECONOMIES, MARKET FAILURE, MARKET PORTFOLIO, MARKETING, MARKETING EFFORT, MATH, MATHEMATICS, MICRO-INSURANCE, MICROFINANCE, MICROFINANCE INSTITUTION, MICROFINANCE INSTITUTIONS, MICROFINANCE LOANS, MICROINSURANCE, MONETARY FUND, MORAL HAZARD, MORTGAGE, MORTGAGE CHOICE, OPERATING COSTS, PAYOUT RATIO, PAYOUT RATIOS, PENETRATION RATE, PENSION, POLITICAL ECONOMY, PORTFOLIO, PRICE INDICES, PRICE INSURANCE, PRICE SENSITIVITY, PRIVATE SECTOR DEVELOPMENT, PROBABILITIES, PROBABILITY, PROFITABILITY, PROSPERITY, PURCHASES, RATE OF RETURN, REMITTANCES, REPAYMENT, REPAYMENTS, REPUTATION, RESEARCH ASSISTANCE, RESERVE BANK, RESOURCE ALLOCATION, RETIREMENT, RETIREMENT SECURITY, RETURNS, RISK AVERSION, RISK DIVERSIFICATION, RISK EXPOSURE, RISK MANAGEMENT, RISK POOLING, RISK SHARING, RURAL FINANCE, SAFETY, SALES, SAVINGS, SAVINGS ACCOUNT, SAVINGS DEPOSITS, SECONDARY SCHOOL, SERIAL NUMBER, SKILLED WORKERS, SMART MONEY, SOCIAL COLLATERAL, SOURCES OF INCOME, STOCK MARKET, SUPPLIERS, TAKE-UP RATE, TAKE-UP RATES, TECHNICAL SUPPORT, TECHNOLOGICAL ADVANCES, TRACK RECORD, TRANSACTIONS COSTS, TRANSITORY INCOME, VALUABLE, VALUE OF SAVINGS, VILLAGE, VILLAGES, VOLATILITY, WELFARE BENEFITS, WORTH