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Title Moral Hazard Incentives under Formal Insurance and Informal Insurance: Evidence from a Framed Field Experiment
Full text https://research.wur.nl/en/publications/moral-hazard-incentives-under-formal-insurance-and-informal-insur
Date 2024
Author(s) Nanyiti, Aisha; Pamuk, Haki
Abstract This paper explores moral hazard incentives associated with formal and informal insurance. We develop a theoretical model of risky effort that incorporates formal insurance and informal risk sharing, and test model predictions through a real-effort experiment with smallholder farmers in rural Uganda. Consistent with the theory, we find evidence of moral hazard under informal insurance. We, however, do not find evidence of moral hazard under formal insurance in our experiment. Experiencing a bad outcome, however, makes the risk in production more salient to farmers, and they increase their insurance coverage. These results suggest there may be some space for expanding indemnity-based insurance to smallholder farmers through awareness programmes.
Subject(s) Life Science
Language en
Relation https://edepot.wur.nl/651441
Type of publication Article/Letter to editor
Format application/pdf
Source Journal of African Economies (2024); ISSN: 0963-8024
Rights Wageningen University & Research
Identifier 10.1093/jae/ejae001
Repository Wageningen - University of Wageningen
Added to C-A: 2024-07-11;10:30:10