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Jack WILLIS (Columbia University) – "Time vs. State in Insurance: Experimental Evidence from Contract Farming in Kenya", joint work with Lorenzo Casaburi

October 13, 2017 @ 12:15 pm - 1:30 pm
The Microeconomics Seminar: Every Wednesday at 12:15 pm.
Time: 12:15 pm – 1:30 pm
Date: Friday 13th of October 2017
Place: Room 3001.
Jack WILLIS (Columbia University) – “Time vs. State in Insurance: Experimental Evidence from Contract Farming in Kenya”, joint work with Lorenzo Casaburi

Abstract: The gains from insurance arise from the transfer of income across states. Yet, by requiring that the premium be paid upfront, standard insurance products also transfer income across time. We show that this intertemporal transfer can help explain low insurance demand, especially among the poor, and in a randomized control trial in Kenya we test a crop insurance product which removes it. The product is interlinked with a contract farming scheme: as with other inputs, the buyer of the crop offers the insurance and deducts the premium from farmer revenues at harvest time. The take-up rate is 72%, compared to 5% for the standard upfront contract, and take-up is highest among poorer farmers. Additional experiments and outcomes indicate that liquidity constraints, present bias and counterparty risk are important constraints on the demand for standard insurance. Finally, evidence from a natural experiment in the United States, exploiting a change in the timing of the premium payment for Federal Crop Insurance, shows that the transfer across time also affects insurance adoption in developed countries.

Anett John (CREST – ENSAE ParisTech) & Pierre Boyer (CREST – École polytechnique)
Food is not provided.