Informal Networks within Index Insurance: Randomizing Distance in Group Insurance
نویسندگان
چکیده
We study the effect of offering index insurance to groups versus individuals on individual’s savings and insurance decisions in a lab experiment in the field, which offers real index insurance. We also look at how the network relationships among dairy farmers in the Dominican Republics affects the demand for group index insurance. Individuals offered group insurance are exogenously grouped according to a distance measure reflecting what individuals know about one another’s assets (number of productive cows) in their dairy farmer association. We find that individuals who are offered group insurance (as well as those who end up purchasing the group insurance) purchase less index insurance on average. This finding is line with theory demonstrating that group purchase encourages individuals to internalize the additional risk taking that formal insurance might allow. We also find that groups in which individuals are closer, are less likely to purchase insurance as a group, and also contribute less of their endowment to insurance. JEL: D81, D85, O1, Q140
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