How Does Risk Management Influence Production Decisions? Evidence from a Field Experiment

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dc.creatorCole, Shawn
dc.creatorGiné, Xavier
dc.creatorVickery, James
dc.date2013-09-27T18:08:37Z
dc.date2013-09-27T18:08:37Z
dc.date2013-07
dc.date.accessioned2026-07-01T00:50:39Z
dc.descriptionWeather is a key source of income risk for many firms and households, particularly in emerging market economies. This paper uses a randomized controlled trial approach to study how an innovative risk management instrument for hedging rainfall risk affects production decisions among a sample of Indian agricultural firms. The analysis finds that the provision of insurance induces farmers to shift production toward higher-return but higher-risk cash crops, particularly among more-educated farmers. The results support the view that financial innovation may help mitigate the real effects of uninsured production risk. In a second experiment, the study elicits willingness to pay for insurance policies that differ in their contract terms, using the Becker-DeGroot-Marshak mechanism. Willingness-to-pay is increasing in the actuarial value of the insurance, but substantially less than one-for-one, suggesting that farmers' valuations are inconsistent with a fully rational benchmark.
dc.formatapplication/pdf
dc.formattext/plain
dc.identifierhttp://documents.worldbank.org/curated/en/2013/07/18030727/risk-management-influence-production-decisions-evidence-field-experiment
dc.identifierhttps://hdl.handle.net/10986/15904
dc.identifierhttps://doi.org/10.1596/1813-9450-6546
dc.identifier.urihttp://hdl.handle.net/123456789/411838
dc.languageEnglish
dc.languageen_US
dc.publisherWorld Bank, Washington, DC
dc.relationPolicy Research Working Paper;No. 6546
dc.rightsCC BY 3.0 IGO
dc.rightshttp://creativecommons.org/licenses/by/3.0/igo/
dc.rightsWorld Bank
dc.subjectACCESS TO INSURANCE
dc.subjectACCOUNTING
dc.subjectADVERSE SELECTION
dc.subjectALLOCATION
dc.subjectAMOUNT OF CREDIT
dc.subjectASSET HOLDINGS
dc.subjectAUCTION
dc.subjectAUTOMOBILE INSURANCE
dc.subjectBANK POLICY
dc.subjectBID
dc.subjectBIDS
dc.subjectBOND
dc.subjectBOND MARKET
dc.subjectBORROWING
dc.subjectBUDGETING
dc.subjectCAPITAL FLOWS
dc.subjectCAPITAL INVESTMENT
dc.subjectCAPITAL STRUCTURE
dc.subjectCASH PAYMENT
dc.subjectCHECKS
dc.subjectCLIMATE
dc.subjectCLIMATE CHANGE
dc.subjectCLIMATE VARIABILITY
dc.subjectCOMMODITY PRICE
dc.subjectCOMPENSATION
dc.subjectCONSUMERS
dc.subjectCONSUMPTION SMOOTHING
dc.subjectCORPORATE FINANCE
dc.subjectCORPORATE INVESTMENT
dc.subjectCOST OF INSURANCE
dc.subjectCOUPONS
dc.subjectCREDIT DEFAULT
dc.subjectCREDIT DEFAULT SWAPS
dc.subjectCREDIT RISK
dc.subjectCROP INSURANCE
dc.subjectDATED CHECK
dc.subjectDECISIONMAKING
dc.subjectDERIVATIVES
dc.subjectDEVELOPING COUNTRIES
dc.subjectDEVELOPMENT ECONOMICS
dc.subjectDISTRIBUTIONAL EFFECTS
dc.subjectDUMMY VARIABLE
dc.subjectECONOMIC ACTIVITY
dc.subjectECONOMIC THEORY
dc.subjectEMERGING MARKET
dc.subjectEMERGING MARKET COUNTRIES
dc.subjectEMERGING MARKET ECONOMIES
dc.subjectEMERGING MARKET ECONOMY
dc.subjectEMPLOYMENT
dc.subjectEXCHANGE RATE
dc.subjectEXPENDITURES
dc.subjectFACE VALUE
dc.subjectFARMING HOUSEHOLD
dc.subjectFEDERAL RESERVE
dc.subjectFEDERAL RESERVE BANK
dc.subjectFEDERAL RESERVE SYSTEM
dc.subjectFINANCIAL ASSETS
dc.subjectFINANCIAL CONSTRAINTS
dc.subjectFINANCIAL DECISIONS
dc.subjectFINANCIAL ECONOMICS
dc.subjectFINANCIAL INNOVATION
dc.subjectFINANCIAL INSTITUTIONS
dc.subjectFINANCIAL INTERMEDIATION
dc.subjectFINANCIAL STUDIES
dc.subjectFINANCIAL SUPPORT
dc.subjectFINANCIAL SYSTEM
dc.subjectFOREIGN CURRENCY
dc.subjectFORGIVENESS
dc.subjectFUTURES
dc.subjectHOUSEHOLD INCOME
dc.subjectHOUSEHOLD SAVINGS
dc.subjectHOUSEHOLD WEALTH
dc.subjectHURRICANE
dc.subjectINCOME
dc.subjectINCOME DISTRIBUTION
dc.subjectINCOME SHOCKS
dc.subjectINCOME SMOOTHING
dc.subjectINCOME STREAM
dc.subjectINCOMPLETE MARKETS
dc.subjectINNOVATIONS
dc.subjectINSTRUMENT
dc.subjectINSURANCE
dc.subjectINSURANCE AGENTS
dc.subjectINSURANCE ARRANGEMENTS
dc.subjectINSURANCE COMPANY
dc.subjectINSURANCE CONTRACT
dc.subjectINSURANCE CONTRACTS
dc.subjectINSURANCE COVERAGE
dc.subjectINSURANCE MARKET
dc.subjectINSURANCE MARKETS
dc.subjectINSURANCE PAYOUT
dc.subjectINSURANCE POLICIES
dc.subjectINSURANCE POLICY
dc.subjectINSURANCE PRODUCT
dc.subjectINSURANCE PRODUCTS
dc.subjectINSURANCE SECTOR
dc.subjectINSURERS
dc.subjectINTEREST RATE
dc.subjectINTEREST RATE SWAPS
dc.subjectINTERNATIONAL BANK
dc.subjectINVESTING
dc.subjectINVESTMENT BEHAVIOR
dc.subjectINVESTMENT DECISIONS
dc.subjectLABOR SUPPLY
dc.subjectLAND USE
dc.subjectLANDOWNER
dc.subjectLIFE INSURANCE
dc.subjectLIQUID ASSETS
dc.subjectMARKET ECONOMIES
dc.subjectMARKET ECONOMY
dc.subjectMARKET VALUE
dc.subjectMICRO-INSURANCE
dc.subjectMICROINSURANCE
dc.subjectMISSING MARKETS
dc.subjectMONETARY VALUES
dc.subjectMONEYLENDERS
dc.subjectMORAL HAZARD
dc.subjectMORTALITY
dc.subjectNET COST
dc.subjectOPTIMAL INVESTMENT
dc.subjectPARTICULAR DEBT
dc.subjectPOLITICAL ECONOMY
dc.subjectPORTFOLIO
dc.subjectPORTFOLIO CHOICE
dc.subjectPOST OFFICE
dc.subjectPRESENT VALUE
dc.subjectPRODUCTIVITY
dc.subjectPROFITABILITY
dc.subjectRATES OF RETURN
dc.subjectRESOURCE ECONOMICS
dc.subjectRETURN
dc.subjectRETURNS
dc.subjectRISK AVERSION
dc.subjectRISK DIVERSIFICATION
dc.subjectRISK EXPOSURE
dc.subjectRISK MANAGEMENT
dc.subjectRISK MITIGATION
dc.subjectSECURITIZATION
dc.subjectSETTLEMENT
dc.subjectSETTLEMENT DATE
dc.subjectSUBSTITUTION
dc.subjectTAX
dc.subjectTRANSACTION
dc.subjectTRANSITORY INCOME
dc.subjectUTILITY FUNCTION
dc.subjectVALUATION
dc.subjectVALUATION TECHNIQUES
dc.subjectVALUATIONS
dc.subjectWEALTH EFFECTS
dc.subjectWEATHER DERIVATIVES
dc.subjectWEATHER INSURANCE
dc.subjecthousehold finance
dc.subjectunderinvestment
dc.titleHow Does Risk Management Influence Production Decisions? Evidence from a Field Experiment

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