Click here for search results
How does risk management influence production decisions? evidence from a field experiment, Volume 1
Author:Cole, Shawn; Gine, Xavier; Vickery, James; Country:World;
Date Stored:2013/07/24Document Date:2013/07/01
Document Type:Policy Research Working PaperSubTopics:Labor Policies; Debt Markets; Non Bank Financial Institutions; Insurance Law; Climate Change Economics
Language:EnglishRegion:The World Region
Report Number:WPS6546Collection Title:Policy Research working paper ; no. WPS 6546Impact Evaluation series ; no. IE 100
Volume No:1  

Summary: Weather is a key source of income risk for many firms and households, particularly in emerging market economies. This paper uses a randomized controlled trial approach to study how an innovative risk management instrument for hedging rainfall risk affects production decisions among a sample of Indian agricultural firms. The analysis finds that the provision of insurance induces farmers to shift production toward higher-return but higher-risk cash crops, particularly among more-educated farmers. The results support the view that financial innovation may help mitigate the real effects of uninsured production risk. In a second experiment, the study elicits willingness to pay for insurance policies that differ in their contract terms, using the Becker-DeGroot-Marshak mechanism. Willingness-to-pay is increasing in the actuarial value of the insurance, but substantially less than one-for-one, suggesting that farmers' valuations are inconsistent with a fully rational benchmark.

Official Documents
Official, scanned versions of documents (may include signatures, etc.)
File TypeDescriptionFile Size (mb)
PDF 55 pagesOfficial version*3.85 (approx.)
TextText version**
How To Order

* The official version is derived from scanning the final, paper copy of the document and is the official,
archived version including all signatures, charts, etc.
** The text version is the OCR text of the final scanned version and is not an accurate representation of the final text.
It is provided solely to benefit users with slow connectivity.

Permanent URL for this page: