Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/170970 
Year of Publication: 
2017
Series/Report no.: 
IZA Discussion Papers No. 10986
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
This paper investigates the crowding out of informal support among peers by the introduction of formal insurance. We show that the availability of insurance changes people's intrinsic motivation to support others. We report results from a lab-in-the-field experiment conducted in Cambodia. Half of the subjects face the risk to lose a large proportion of their endowment. It is varied whether they can purchase an insurance before the loss is determined. The other half of the subjects can transfer part of their endowment to those who lose. We find that significantly lower transfers are provided to subjects who had the option to purchase insurance but did not use this option than to subjects who did not have the insurance option available. We show that the reduction in transfers is not affected by whether subjects were informed about the possibility of informal support when making their insurance decision. Our findings indicate that the extent of crowding out may be larger than previously thought, because insurance does not only change economic incentives but also affects intrinsic motivations.
Subjects: 
insurance
informal support
crowding-out
social preferences
Cambodia
JEL: 
D03
C91
O12
Document Type: 
Working Paper

Files in This Item:
File
Size





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