Basis Risk, Social Comparison, Perceptions of Fairness and Demand for Insurance: A Field Experiment in Ethiopia
Index insurance is considered an important strategy to reduce agricultural risk and increase smallholder farmers’ investments. However, insured farmers may develop mistrust of insurance if they experience crop losses and do not receive a payout, for instance because index insurance covers only a sub...
| Autores principales: | , , |
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| Formato: | Conference Paper |
| Lenguaje: | Inglés |
| Publicado: |
American Economic Association
2024
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| Acceso en línea: | https://hdl.handle.net/10568/137213 |
| _version_ | 1855531588205412352 |
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| author | Kramer, Berber Porter, Maria Wassie Bizuayehu, Solomon |
| author_browse | Kramer, Berber Porter, Maria Wassie Bizuayehu, Solomon |
| author_facet | Kramer, Berber Porter, Maria Wassie Bizuayehu, Solomon |
| author_sort | Kramer, Berber |
| collection | Repository of Agricultural Research Outputs (CGSpace) |
| description | Index insurance is considered an important strategy to reduce agricultural risk and increase smallholder farmers’ investments. However, insured farmers may develop mistrust of insurance if they experience crop losses and do not receive a payout, for instance because index insurance covers only a subset of covariate risks. At the same time, insurance for idiosyncratic risks would introduce differences in payouts within social networks, which might be considered unfair, introduce jealousy, and further depress demand for insurance. We conduct lab-in-the-field experiments with farmers in Ethiopia to examine the effects of a novel insurance approach that ensures insurance payouts for farmers with crop losses due to idiosyncratic events. We also examine the effects of informing farmers about their neighbors’ experiences alongside their own. We find that such social comparison increases perceived fairness of weather index insurance. In addition, providing complete insurance coverage for crop losses increases farmers’ perceived fairness of outcomes and willingness to pay, without introducing jealousy over neighbors receiving different payouts. Finally, we find that the increase in willingness to pay for complete insurance is concentrated among men and risk averse respondents. |
| format | Conference Paper |
| id | CGSpace137213 |
| institution | CGIAR Consortium |
| language | Inglés |
| publishDate | 2024 |
| publishDateRange | 2024 |
| publishDateSort | 2024 |
| publisher | American Economic Association |
| publisherStr | American Economic Association |
| record_format | dspace |
| spelling | CGSpace1372132025-12-08T10:29:22Z Basis Risk, Social Comparison, Perceptions of Fairness and Demand for Insurance: A Field Experiment in Ethiopia Kramer, Berber Porter, Maria Wassie Bizuayehu, Solomon risk insurance demand risk management crop insurance Index insurance is considered an important strategy to reduce agricultural risk and increase smallholder farmers’ investments. However, insured farmers may develop mistrust of insurance if they experience crop losses and do not receive a payout, for instance because index insurance covers only a subset of covariate risks. At the same time, insurance for idiosyncratic risks would introduce differences in payouts within social networks, which might be considered unfair, introduce jealousy, and further depress demand for insurance. We conduct lab-in-the-field experiments with farmers in Ethiopia to examine the effects of a novel insurance approach that ensures insurance payouts for farmers with crop losses due to idiosyncratic events. We also examine the effects of informing farmers about their neighbors’ experiences alongside their own. We find that such social comparison increases perceived fairness of weather index insurance. In addition, providing complete insurance coverage for crop losses increases farmers’ perceived fairness of outcomes and willingness to pay, without introducing jealousy over neighbors receiving different payouts. Finally, we find that the increase in willingness to pay for complete insurance is concentrated among men and risk averse respondents. 2024-01-07 2024-01-05T12:41:31Z 2024-01-05T12:41:31Z Conference Paper https://hdl.handle.net/10568/137213 en https://hdl.handle.net/10568/145897 https://hdl.handle.net/10568/111050 Open Access American Economic Association Kramer, Berber; Porter, Maria; and Wassie Bizuayehu, Solomon. 2023. Basis risk, social comparison, perceptions of fairness and demand for insurance: A field experiment in Ethiopia. Paper presented at the 2024 AEA/ASSA Annual Meeting, January 5-7, 2024, San Antonia, TX. https://purl.umn.edu/339075 |
| spellingShingle | risk insurance demand risk management crop insurance Kramer, Berber Porter, Maria Wassie Bizuayehu, Solomon Basis Risk, Social Comparison, Perceptions of Fairness and Demand for Insurance: A Field Experiment in Ethiopia |
| title | Basis Risk, Social Comparison, Perceptions of Fairness and Demand for Insurance: A Field Experiment in Ethiopia |
| title_full | Basis Risk, Social Comparison, Perceptions of Fairness and Demand for Insurance: A Field Experiment in Ethiopia |
| title_fullStr | Basis Risk, Social Comparison, Perceptions of Fairness and Demand for Insurance: A Field Experiment in Ethiopia |
| title_full_unstemmed | Basis Risk, Social Comparison, Perceptions of Fairness and Demand for Insurance: A Field Experiment in Ethiopia |
| title_short | Basis Risk, Social Comparison, Perceptions of Fairness and Demand for Insurance: A Field Experiment in Ethiopia |
| title_sort | basis risk social comparison perceptions of fairness and demand for insurance a field experiment in ethiopia |
| topic | risk insurance demand risk management crop insurance |
| url | https://hdl.handle.net/10568/137213 |
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