Formal Insurance, Risk Sharing, and the Dynamics of Other-Regarding Preferences
In the absence of formal financial markets, many poor households rely on risk sharing networks to protect themselves against adverse events. In this paper we present a model that explains the impact of formal insurance on informal risk sharing and, subsequently, the dynamics of other-regarding preferences. We use a field experiment to test the predictions of the model with rural households in Mexico. Consistent with the model predictions, we find that when shocks are collective, there is a crowding-out effect on transfers and a decrease in trust on insured participants. However, when shocks are idiosyncratic, we fail to confirm the predictions of the model. Transfers to non-insured members are significantly higher when insurance is available to some of the network members than in a control treatment when insurance is not available. This unexpected crowding-in effect on transfers leads to an increase in trust among non-insured participants. These findings suggest that there is a need to find optimal insurance designs that minimizes the crowding-out effect of formal insurance on informal risk sharing and other-regarding preferences
Year of publication: |
2018
|
---|---|
Authors: | Freudenreich, Hanna |
Other Persons: | Ibanez, Marcela (contributor) ; Dietrich, Stephan (contributor) ; Musshoff, Oliver (contributor) |
Publisher: |
[2018]: [S.l.] : SSRN |
Saved in:
freely available
Extent: | 1 Online-Ressource (46 p) |
---|---|
Type of publication: | Book / Working Paper |
Language: | English |
Notes: | Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments October 26, 2017 erstellt |
Other identifiers: | 10.2139/ssrn.3100388 [DOI] |
Source: | ECONIS - Online Catalogue of the ZBW |
Persistent link: https://www.econbiz.de/10012930546
Saved in favorites
Similar items by person
-
Formal insurance, risk sharing, and the dynamics of other-regarding preferences
Freudenreich, Hanna, (2018)
-
Formal insurance, risk sharing, and the dynamics of other-regarding preferences
Freudenreich, Hanna, (2018)
-
Risk, insurance and technology adoption in rural development - evidence from Southern Mexico
Freudenreich, Hanna, (2017)
- More ...