IDEAS home Printed from https://ideas.repec.org/a/eee/wdevel/v78y2016icp324-340.html
   My bibliography  Save this article

Experimental Evidence on the Drivers of Index-Based Livestock Insurance Demand in Southern Ethiopia

Author

Listed:
  • Takahashi, Kazushi
  • Ikegami, Munenobu
  • Sheahan, Megan
  • Barrett, Christopher B.

Abstract

While index-based microinsurance has attracted considerable attention, uptake rates have been weak in many low-income countries. We explore the purchase patterns of index-based livestock insurance in southern Ethiopia, focusing on the role of accurate product comprehension and price. We find that randomly distributed learning kits improve subjects’ knowledge of the products; however, we do not find strong evidence that the improved knowledge per se causes greater insurance uptake. We also find that reduced price due to randomly distributed discount coupons has an immediate, positive impact on uptake, without dampening subsequent period demand due to reference-dependence associated with price anchoring effects.

Suggested Citation

  • Takahashi, Kazushi & Ikegami, Munenobu & Sheahan, Megan & Barrett, Christopher B., 2016. "Experimental Evidence on the Drivers of Index-Based Livestock Insurance Demand in Southern Ethiopia," World Development, Elsevier, vol. 78(C), pages 324-340.
  • Handle: RePEc:eee:wdevel:v:78:y:2016:i:c:p:324-340 DOI: 10.1016/j.worlddev.2015.10.039
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0305750X15002612
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Antoine Leblois & Philippe Quirion & Agali Alhassane & Seydou Traoré, 2014. "Weather Index Drought Insurance: An Ex Ante Evaluation for Millet Growers in Niger," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, pages 527-551.
    2. Dean Karlan & Robert Osei & Isaac Osei-Akoto & Christopher Udry, 2014. "Agricultural Decisions after Relaxing Credit and Risk Constraints," The Quarterly Journal of Economics, Oxford University Press, pages 597-652.
    3. Townsend, Robert M, 1994. "Risk and Insurance in Village India," Econometrica, Econometric Society, pages 539-591.
    4. Stefan Dercon & Pramila Krishnan, 2000. "In Sickness and in Health: Risk Sharing within Households in Rural Ethiopia," Journal of Political Economy, University of Chicago Press, pages 688-727.
    5. Shawn Cole & Xavier Gine & Jeremy Tobacman & Petia Topalova & Robert Townsend & James Vickery, 2013. "Barriers to Household Risk Management: Evidence from India," American Economic Journal: Applied Economics, American Economic Association, pages 104-135.
    6. Michael Carter & Christopher Barrett, 2006. "The economics of poverty traps and persistent poverty: An asset-based approach," Journal of Development Studies, Taylor & Francis Journals, pages 178-199.
    7. S. Viswanathan & Adriano Rampini, 2013. "Household risk management," 2013 Meeting Papers 647, Society for Economic Dynamics.
    8. MARIEKE HUYSENTRUYT & CHRISTOPHER B. BARRETT & JOHN G. McPEAK, 2009. "Understanding Declining Mobility and Inter-household Transfers among East African Pastoralists," Economica, London School of Economics and Political Science, vol. 76(302), pages 315-336, April.
    9. Hans P. Binswanger, 1980. "Attitudes Toward Risk: Experimental Measurement in Rural India," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, pages 395-407.
    10. Gin, Xavier & Yang, Dean, 2009. "Insurance, credit, and technology adoption: Field experimental evidencefrom Malawi," Journal of Development Economics, Elsevier, pages 1-11.
    11. Rosenzweig, Mark R & Wolpin, Kenneth I, 1993. "Credit Market Constraints, Consumption Smoothing, and the Accumulation of Durable Production Assets in Low-Income Countries: Investment in Bullocks in India," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 223-244, April.
    12. Michael Lokshin & Elena Glinskaya, 2009. "The Effect of Male Migration on Employment Patterns of Women in Nepal," World Bank Economic Review, World Bank Group, pages 481-507.
    13. Dean Karlan & Robert Osei & Isaac Osei-Akoto & Christopher Udry, 2014. "Agricultural Decisions after Relaxing Credit and Risk Constraints," The Quarterly Journal of Economics, Oxford University Press, pages 597-652.
    14. Jones, Andrew M, 1992. "A Note on Computation of the Double-Hurdle Model with Dependence with an Application to Tobacco Expenditure," Bulletin of Economic Research, Wiley Blackwell, vol. 44(1), pages 67-74, January.
    15. Antoine Leblois & Philippe Quirion & Agali Alhassane & Seydou Traoré, 2014. "Weather Index Drought Insurance: An Ex Ante Evaluation for Millet Growers in Niger," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, pages 527-551.
    16. Sommarat Chantarat & Andrew G. Mude & Christopher B. Barrett & Michael R. Carter, 2013. "Designing Index-Based Livestock Insurance for Managing Asset Risk in Northern Kenya," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 80(1), pages 205-237, March.
    17. Zant, Wouter, 2008. "Hot Stuff: Index Insurance for Indian Smallholder Pepper Growers," World Development, Elsevier, vol. 36(9), pages 1585-1606, September.
    18. Mario J. Miranda & Katie Farrin, 2012. "Index Insurance for Developing Countries," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, pages 391-427.
    19. Sahn, David E. & Stifel, David C., 2000. "Poverty Comparisons Over Time and Across Countries in Africa," World Development, Elsevier, vol. 28(12), pages 2123-2155, December.
    20. Carter, Michael R. & Little, Peter D. & Mogues, Tewodaj & Negatu, Workneh, 2007. "Poverty Traps and Natural Disasters in Ethiopia and Honduras," World Development, Elsevier, vol. 35(5), pages 835-856, May.
    21. Travis J. Lybbert & David R. Just & Christopher B. Barrett, 2013. "Estimating risk preferences in the presence of bifurcated wealth dynamics: can we identify static risk aversion amidst dynamic risk responses?," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, pages 361-377.
    22. Christopher Udry, 1994. "Risk and Insurance in a Rural Credit Market: An Empirical Investigation in Northern Nigeria," Review of Economic Studies, Oxford University Press, vol. 61(3), pages 495-526.
    23. Jing Cai & Alain De Janvry & Elisabeth Sadoulet, 2015. "Social Networks and the Decision to Insure," American Economic Journal: Applied Economics, American Economic Association, pages 81-108.
    24. Travis J. Lybbert & Christopher B. Barrett & Solomon Desta & D. Layne Coppock, 2004. "Stochastic wealth dynamics and risk management among a poor population," Economic Journal, Royal Economic Society, vol. 114(498), pages 750-777, October.
    25. Cragg, John G, 1971. "Some Statistical Models for Limited Dependent Variables with Application to the Demand for Durable Goods," Econometrica, Econometric Society, vol. 39(5), pages 829-844, September.
    26. Jensen, Nathaniel & Mude, Andrew & Barrett, Christopher, 2014. "How Basis Risk and Spatiotemporal Adverse Selection Influence Demand for Index Insurance: Evidence from Northern Kenya," MPRA Paper 60452, University Library of Munich, Germany.
    27. Matthew Jowett, 2003. "Do informal risk sharing networks crowd out public voluntary health insurance? Evidence from Vietnam," Applied Economics, Taylor & Francis Journals, vol. 35(10), pages 1153-1161.
    28. Pascaline Dupas, 2014. "Short‐Run Subsidies and Long‐Run Adoption of New Health Products: Evidence From a Field Experiment," Econometrica, Econometric Society, vol. 82(1), pages 197-228, January.
    29. Barrett, Christopher B. & Santos, Paulo, 2014. "The impact of changing rainfall variability on resource-dependent wealth dynamics," Ecological Economics, Elsevier, vol. 105(C), pages 48-54.
    30. Garcia, Jaume & Labeaga, Jose M, 1996. "Alternative Approaches to Modelling Zero Expenditure: An Application to Spanish Demand for Tobacco," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 58(3), pages 489-506, August.
    31. Gin, Xavier & Yang, Dean, 2009. "Insurance, credit, and technology adoption: Field experimental evidencefrom Malawi," Journal of Development Economics, Elsevier, pages 1-11.
    32. Jensen, Nathaniel D. & Barrett, Christopher B. & Mude, Andrew G., 2014. "Basis Risk and the Welfare Gains from Index Insurance: Evidence from Northern Kenya," MPRA Paper 59153, University Library of Munich, Germany.
    33. Skees, Jerry R., 2008. "Innovations in Index Insurance for the Poor in Lower Income Countries," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 37(1), April.
    34. Morduch, Jonathan J. & Stern, Hal S., 1997. "Using mixture models to detect sex bias in health outcomes in Bangladesh," Journal of Econometrics, Elsevier, pages 259-276.
    35. John McPeak, 2010. "Explaining index-based livestock insurance to pastoralists," Agricultural Finance Review, Emerald Group Publishing, vol. 70(3), pages 333-352, November.
    36. Craig McIntosh & Alexander Sarris & Fotis Papadopoulos, 2013. "Productivity, credit, risk, and the demand for weather index insurance in smallholder agriculture in Ethiopia," Agricultural Economics, International Association of Agricultural Economists, vol. 44(4-5), pages 399-417, July.
    37. Santos, Paulo & Barrett, Christopher B., 2011. "Persistent poverty and informal credit," Journal of Development Economics, Elsevier, pages 337-347.
    38. Xavier Giné & Robert Townsend & James Vickery, 2008. "Patterns of Rainfall Insurance Participation in Rural India," World Bank Economic Review, World Bank Group, pages 539-566.
    39. Jonathan Morduch, 1995. "Income Smoothing and Consumption Smoothing," Journal of Economic Perspectives, American Economic Association, pages 103-114.
    40. Skees, Jerry R., 2008. "Innovations in Index Insurance for the Poor in Lower Income Countries," Agricultural and Resource Economics Review, Cambridge University Press, pages 1-15.
    41. Xavier Giné & Robert Townsend & James Vickery, 2008. "Patterns of Rainfall Insurance Participation in Rural India," World Bank Economic Review, World Bank Group, pages 539-566.
    42. Biener, Christian, 2013. "Pricing in Microinsurance Markets," World Development, Elsevier, vol. 41(C), pages 132-144.
    43. Mario J. Miranda & Katie Farrin, 2012. "Index Insurance for Developing Countries," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, pages 391-427.
    44. William J. Burke, 2009. "Fitting and interpreting Cragg's tobit alternative using Stata," Stata Journal, StataCorp LP, pages 584-592.
    45. Di Falco, Salvatore & Bulte, Erwin, 2013. "The Impact of Kinship Networks on the Adoption of Risk-Mitigating Strategies in Ethiopia," World Development, Elsevier, vol. 43(C), pages 100-110.
    46. Bhattamishra, Ruchira & Barrett, Christopher B., 2010. "Community-Based Risk Management Arrangements: A Review," World Development, Elsevier, vol. 38(7), pages 923-932, July.
    47. Barnett, Barry J. & Barrett, Christopher B. & Skees, Jerry R., 2008. "Poverty Traps and Index-Based Risk Transfer Products," World Development, Elsevier, vol. 36(10), pages 1766-1785, October.
    48. Christopher B. Barrett, 2011. "Covariate Catastrophic Risk Management in the Developing World: Discussion," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 93(2), pages 512-513.
    49. John McPeak, 2004. "Contrasting income shocks with asset shocks: livestock sales in northern Kenya," Oxford Economic Papers, Oxford University Press, vol. 56(2), pages 263-284, April.
    50. Lena Giesbert & Susan Steiner & Mirko Bendig, 2011. "Participation in Micro Life Insurance and the Use of Other Financial Services in Ghana," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 78(1), pages 7-35, March.
    51. Jonathan Morduch, 1995. "Income Smoothing and Consumption Smoothing," Journal of Economic Perspectives, American Economic Association, pages 103-114.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. repec:oup:apecpp:v:39:y:2017:i:2:p:199-219. is not listed on IDEAS
    2. Achtnicht, Martin & Osberghaus, Daniel, 2016. "The demand for index-based flood insurance in a high-income country," ZEW Discussion Papers 16-051, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    3. Takahashi, Kazushi, 2016. "Mobile Phone Expansion, Informal Risk Sharing, and Consumption Smoothing: Evidence from Rural Uganda," MPRA Paper 75135, University Library of Munich, Germany.
    4. repec:pal:gpprii:v:42:y:2017:i:4:d:10.1057_s41288-017-0060-5 is not listed on IDEAS
    5. Woodard, Joshua, 2016. "Estimation of Insurance Deductible Demand under Endogenous Premium Rates," 2016 Annual Meeting, July 31-August 2, 2016, Boston, Massachusetts 236151, Agricultural and Applied Economics Association.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:wdevel:v:78:y:2016:i:c:p:324-340. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu). General contact details of provider: http://www.elsevier.com/locate/worlddev .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.