Notes on the Field Identification of Anser fabalis serrirostris and A. f. middendorfi

Abstract

Financial engineering offers the potential to significantly ameliorate income fluctuations faced by individuals, households, and firms. Yet, to date, much of this promise remains unrealized. In this paper, we study household participation in an innovative rainfall insurance product offered to low-income rural Indian households. Farmers are exposed to substantial income risk from rainfall variation during the growing season; the insurance contract compensates farmers in case of deficient rainfall. We first document relatively low levels of adoption of risk management: for example, households tend to purchase only one unit of insurance, no matter how large their risk exposure. We then conduct a series of field experiments to test theoretical predictions of why adoption may be low. These experiments demonstrate that price and credit constraints are important determinants of insurance adoption. However, we also find evidence that non-standard factors affect take-up: while an education module is not important, endorsement from a trusted third party is. We find some evidence that subtle psychological manipulations affect take-up.