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Social Networks and the Decision to Insure

Author

Listed:
  • Jing Cai
  • Alain De Janvry
  • Elisabeth Sadoulet

Abstract

Using data from a randomized experiment in rural China, we study the influence of social networks on weather insurance adoption and the mechanisms through which they operate. To quantify network effects, the experiment provides intensive information sessions about the product to a random subset of farmers. For untreated farmers, the effect of having an additional treated friend on take-up is equivalent to granting a 13 percent reduction in the insurance premium. By varying the information available about peers' decisions and randomizing default options, we show that the network effect is driven by the diffusion of insurance knowledge rather than purchase decisions. (JEL G22, O12, O16, P36, Q12, Q54, Z13)

Suggested Citation

  • Jing Cai & Alain De Janvry & Elisabeth Sadoulet, 2015. "Social Networks and the Decision to Insure," American Economic Journal: Applied Economics, American Economic Association, vol. 7(2), pages 81-108, April.
    • Handle: RePEc:aea:aejapp:v:7:y:2015:i:2:p:81-108
    Note: DOI: 10.1257/app.20130442
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    More about this item

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • P36 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Consumer Economics; Health; Education and Training; Welfare, Income, Wealth, and Poverty
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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