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Does Index Insurance Crowd In or Crowd Out Informal Risk Sharing? Evidence from Rural Ethiopia
Author(s) -
Takahashi Kazushi,
Barrett Christopher B.,
Ikegami Munenobu
Publication year - 2019
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.1093/ajae/aay042
Subject(s) - index (typography) , context (archaeology) , product (mathematics) , incentive , business , peer effects , key person insurance , actuarial science , public economics , economics , insurance policy , microeconomics , geography , psychology , social psychology , geometry , mathematics , archaeology , world wide web , computer science
We study how the introduction of a formal index insurance product affects informal risk‐sharing among pastoralists in southern Ethiopia. Using detailed social networks data, randomized incentives to purchase the insurance product, and hypothetical informal transfer data that mirror the existing customary arrangements, we find respondents’ own formal insurance uptake has no significant effect on their willingness to share risk through customary institutions. We also find weak evidence that a randomly matched peer's insurance uptake positively influences respondents’ willingness to make informal transfers to that match. Overall, our results imply that in this context index insurance does not crowd out informal risk‐sharing mediated by social networks.