Microinsurance, Trust and Economic Development: Evidence from a Randomized Natural Field Experiment

36 Pages Posted: 29 Sep 2009

See all articles by Hongbin Cai

Hongbin Cai

Peking University - Guanghua School of Management

Yuyu Chen

Peking University - Guanghua School of Management

Hanming Fang

University of Pennsylvania - Department of Economics; National Bureau of Economic Research (NBER)

Li-An Zhou

Peking University - Guanghua School of Management

Multiple version iconThere are 2 versions of this paper

Date Written: September 24, 2009

Abstract

We report results from a large randomized natural field experiment conducted in southwestern China in the context of insurance for sows. Our study sheds light on two important questions about microinsurance. First, how does access to formal insurance affect farmers' production decisions? Second, what explains the low takeup rate of formal insurance, despite substantial premium subsidy from the government? We find that providing access to formal insurance significantly increases farmers' tendency to raise sows. We argue that this finding also suggests that farmers are not previously insured efficiently through informal mechanisms. We also provide several pieces of evidence suggesting that trust, or lack thereof, for government-sponsored insurance products is a significant barrier for farmers' willingness to participate in the insurance program.

Keywords: Microinsurance, Trust, Natural Field Experiment

JEL Classification: C93, O12, O16

Suggested Citation

Cai, Hongbin and Chen, Yuyu and Fang, Hanming and Zhou, Li-An, Microinsurance, Trust and Economic Development: Evidence from a Randomized Natural Field Experiment (September 24, 2009). PIER Working Paper No. 09-034. Available at SSRN: https://ssrn.com/abstract=1479618 or http://dx.doi.org/10.2139/ssrn.1479618

Hongbin Cai

Peking University - Guanghua School of Management ( email )

Peking University
Beijing, Beijing 100871
China

Yuyu Chen

Peking University - Guanghua School of Management ( email )

Peking University
Beijing, Beijing 100871
China

Hanming Fang (Contact Author)

University of Pennsylvania - Department of Economics ( email )

Ronald O. Perelman Center for Political Science
133 South 36th Street
Philadelphia, PA 19104-6297
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Li-An Zhou

Peking University - Guanghua School of Management ( email )

Peking University
Beijing, Beijing 100871
China

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