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

Shawn Cole | Zendy; Xavier Giné | Zendy; James Vickery | Zendy

AI Assistant Blog Pricing

Home ZAIA Blog

Open Access

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

Author(s) -

Shawn Cole,

Xavier Giné,

James Vickery

Publication year - 2016

Publication title -

review of financial studies

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 12.8

H-Index - 190

eISSN - 1465-7368

pISSN - 0893-9454

DOI - 10.1093/rfs/hhw080

Subject(s) - production (economics) , product (mathematics) , cash , business , ex ante , risk management , agricultural economics , economics , finance , geometry , mathematics , macroeconomics

Weather is a key source of income risk, especially in emerging market economies. This paper uses a randomized controlled trial involving Indian farmers to study how an innovative rainfall insurance product affects production decisions. The authors find that insurance provision induces farmers to invest more in higher-return but rainfall-sensitive cash crops, particularly among educated farmers. This shift in behavior occurs ex ante, when realized monsoon rainfall is still uncertain. The results suggest that financial innovation can mitigate the real effects of uninsured production risk.

The content you want is available to Zendy users.

Already have an account? Click here to sign in.

Having issues? You can contact us here

Accelerating Research