nep-mfd New Economics Papers
on Microfinance
Issue of 2018‒06‒11
two papers chosen by
Olivier Dagnelie
Université de Caen

  1. The Impact of Commercial Rainfall Index Insurance: Experimental Evidence from Ethiopia By Shukkri AHMED; Craig MCINTOSH; Alexandros SARRIS
  2. The Demand for Health Insurance in a Poor Economy: Evidence from Burkina Faso By Schleicher, Michael; Klonner, Stefan; Sauerborn, Rainer; Sié, Alie; Souares, Aurélia

  1. By: Shukkri AHMED (FERDI); Craig MCINTOSH (University of California at San Diego); Alexandros SARRIS (Université d'Athènes)
    Abstract: We present the results of an experiment introducing commercial rainfall index insurance into drought-plagued farming cooperatives in Amhara State, Ethiopia. We introduce a market-priced rainfall deficit insurance product through producer cooperatives, and test a number of potential ways to kick-start private demand. Takeup of the insurance at market prices is very low, between .5% and 3% across seasons, but a low-cost promotion at baseline increases willingness to pay for multiple seasons. When we use a randomized experiment to distribute small free insurance contracts to farmers, 39% of subsidized individuals enroll but this fails to stimulate input use, yields, or income, and nor does it enhance demand in subsequent seasons. Our experience in interlinking credit with insurance shows that while serious logistical challenges need to be overcome, real demand can exist for state-contingent credit in this context.
    Keywords: Index Insurance, Randomized Experiments, Ethiopian Agriculture
    JEL: O13 G22 C93
    Date: 2017–08
  2. By: Schleicher, Michael; Klonner, Stefan; Sauerborn, Rainer; Sié, Alie; Souares, Aurélia
    Abstract: We investigate the properties of health insurance demand in Burkina Faso, where we offered poor households a voluntary health insurance product at half the usual price. The targeting procedure we implemented delivers a fuzzy regression discontinuity design, which identifies the price elasticity of demand for health insurance as well as associated selection effects. We find large price elasticities among urban households, whereas the demand of rural households is price-inelastic. There are important selection effects, with widowed male household heads being most price-sensitive. Correlating these heterogeneous effects with survey data on informal transfers and health expenditures, our results suggest that informal risk-sharing largely crowds out formal insurance and that a single insurance product may fail to align with poor households' small health budgets. We find no adverse selection into health insurance.
    Date: 2018–05–23

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