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Interlinking Product and Insurance Markets : Experimental Evidence from Contract Farming in Kenya ∗
| Content Provider | Semantic Scholar |
|---|---|
| Author | Casaburi, Lorenzo Willis, Jack |
| Copyright Year | 2015 |
| Abstract | By requiring the upfront payment of the premium, standard agricultural insurance products introduce a transfer of income across periods. Enforcement limitations typically prevent insurers from offering contracts that only feature transfers across states. Using an RCT implemented in a contract farming scheme in Kenya, we test a novel interlinked product in which the buyer of the crop offers insurance and deducts the premium from farmer revenues at harvest time. Take-up rates at actuarially fair levels are 71.6%, 67 percentage points higher than the equivalent standard contract. We argue that the insurance product jointly addresses multiple potential intertemporal distortions and behavioral biases. Evidence from a second experiment and survey data show that, by removing liquidity constraint concerns, the interlinked insurance achieves better targeting of poorer farmers. ∗ Lorenzo Casaburi, casaburi@stanford.edu. Jack Willis, jackwillis@fas.harvard.edu. We wish to thanks Michael Carter, Pascaline Dupas, Oliver Hart, Michael Kremer, Craig McIntosh, Mushfiq Mubarak, Nathan Nunn, Andrei Shleifer, Tavneet Suri, Chris Udry and seminar audiences at the Columbia, GWU (Basis Technical Meeting), Harvard, IGC International Growth Week, and Stanford for useful comments. We are grateful to Noah Mambo, Mayara Silva and Rachel Steinacher for excellent research assistance and to the management of the contract farming company for their continued partnership. The project is funded by USAID BASIS and by anonymous donor, to whom we are very grateful. All errors are our own. |
| File Format | PDF HTM / HTML |
| Alternate Webpage(s) | https://editorialexpress.com/cgi-bin/conference/download.cgi?db_name=CSAE2015&paper_id=979 |
| Language | English |
| Access Restriction | Open |
| Content Type | Text |
| Resource Type | Article |
