Institutional Affiliation: CRED, University of Namur
|The Spillover Impact of Index Insurance on Agricultural Investment by Cotton Farmers in Burkina Faso|
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This paper examines whether agricultural insurance can boost investment by small scale farmers in West Africa. We conduct a randomized evaluation to analyze the impacts of index insurance for cotton farmers in Burkina Faso. We find no impact of insurance on cotton, but, consistent with microeconomic theory, we find significant spillover impacts on investment in other agricultural activities. Furthermore, the effects of insurance payouts on farmers hit by a shock confirm the potential of index insurance as a risk-management tool. However, we uncover important flaws in the implementation of the project that limited its impacts. Overall, this study suggests a promising role of index insurance for stimulating investment, but also draws attention to key challenges for an efficient delivery of i...
|Insurance Contracts when Individuals “Greatly Value” Certainty: Results from a Field Experiment in Burkina Faso|
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In discussing the paradoxical violation of expected utility theory that now bears his name, Maurice Allais noted that individuals tend to “greatly value” payoffs that are certain. Allais' observation would seem to imply that people will undervalue insurance relative to the predictions of expected utility theory because as conventionally constructed, insurance offers an uncertain benefit in exchange for a certain cost that certainty-loving individuals will overvalue. Pursuing this logic, we implemented insurance games with cotton farmers in Burkina Faso. On average, farmer willingness to pay for insurance increases significantly when a premium rebate framing is used to render both costs and benefits of insurance uncertain. We show that the impact of the rebate frame on the willingness to pa...
Published: Elena Serfilippi & Michael Carter & Catherine Guirkinger, 2019. "Insurance contracts when individuals “greatly value” certainty: Results from a field experiment in Burkina Faso," Journal of Economic Behavior & Organization, .