Journal
JOURNAL OF ECONOMIC BEHAVIOR & ORGANIZATION
Volume 180, Issue -, Pages 718-730Publisher
ELSEVIER
DOI: 10.1016/j.jebo.2019.07.018
Keywords
Index-based insurance; Risk aversion; Ambiguity aversion; Lab-in-the-field experiment
Categories
Funding
- Netherlands Fellowship Programme (NFP)
- UK Economic and Social Research Council (ESRC)
- UK Department for International Development (DFID) [ES/L012235/1]
- ESRC [ES/N013344/2, ES/N013344/1, ES/L012235/1] Funding Source: UKRI
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Index-based insurance (IBI) is an innovative pro-poor climate risk management strategy that suffers from low uptake. Evidence on the role of behavioral impediments in adoption of IBI is scant. We conducted lab-in-the-field experiments with 1139 smallholders out of whom 596 have adopted IBI in Ethiopia to elicit their risk and ambiguity aversion behavior, and examine whether risk and/or ambiguity aversion can explain actual IBI uptake decisions. Our study suggests that an increase in risk-aversion increases uptake, but an increase in ambiguity-aversion lowers uptake of IBI. We also find evidence that an increase in risk aversion speeds-up the uptake of IBI, while an increase in ambiguity aversion delays the adoption of IBI. (C) 2019 Elsevier B.V. All rights reserved.
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