Arbeitspapier
Index Based Insurance in Developing Countries: Rational Neglect?
Microinsurance adoption in developing countries is low, despite its potential to foster economic growth. Recent research is not able to explain the low demand within the neoclassical framework. I contribute to this stream of research by proposing rational as well as boundedly rational explanations for the low attractiveness of microinsurance within a stochastic framework. More precisely, I analyze weather index insurance. My model makes separate predictions for close farmers, whose location is near a weather station, and distant farmers. Results show that the latter ask for less than 50% insurance coverage even under perfect rationality. I extend the model by integrating incorrect beliefs. I can show that a lack of trust reduces insurance demand most for close farmers, while a lack of knowledge about the insurance negatively affects the demand of distant farmers. Moreover, subsidies are more effective for close than for distant farmers.
- Language
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Englisch
- Classification
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Wirtschaft
Insurance; Insurance Companies; Actuarial Studies
Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making‡
Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
Economic Development: Agriculture; Natural Resources; Energy; Environment; Other Primary Products
Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
- Subject
-
index insurance
basis risk
microinsurance
developing countries
understanding of insurance products
trust in insurer
- Event
-
Geistige Schöpfung
- (who)
-
Würtenberger, Daniel
- Event
-
Veröffentlichung
- (who)
-
ZBW – Leibniz Information Centre for Economics
- (where)
-
Kiel, Hamburg
- (when)
-
2019
- Handle
- Last update
-
10.03.2025, 11:43 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Würtenberger, Daniel
- ZBW – Leibniz Information Centre for Economics
Time of origin
- 2019
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