Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/206408 
Year of Publication: 
2019
Publisher: 
ZBW – Leibniz Information Centre for Economics, Kiel, Hamburg
Abstract: 
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.
Subjects: 
index insurance
basis risk
microinsurance
developing countries
understanding of insurance products
trust in insurer
JEL: 
G22
D91
Q12
O13
O16
Document Type: 
Working Paper

Files in This Item:





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.