Social Networks and the Decision to Insure
American Economic Journal: Applied Economics
vol. 7,
no. 2, April 2015
(pp. 81-108)
Abstract
Using data from a randomized experiment in rural China, we study the influence of social networks on weather insurance adoption and the mechanisms through which they operate. To quantify network effects, the experiment provides intensive information sessions about the product to a random subset of farmers. For untreated farmers, the effect of having an additional treated friend on take-up is equivalent to granting a 13 percent reduction in the insurance premium. By varying the information available about peers' decisions and randomizing default options, we show that the network effect is driven by the diffusion of insurance knowledge rather than purchase decisions. (JEL G22, O12, O16, P36, Q12, Q54, Z13)Citation
Cai, Jing, Alain De Janvry, and Elisabeth Sadoulet. 2015. "Social Networks and the Decision to Insure." American Economic Journal: Applied Economics, 7 (2): 81-108. DOI: 10.1257/app.20130442Additional Materials
JEL Classification
- G22 Insurance; Insurance Companies; Actuarial Studies
- O12 Microeconomic Analyses of Economic Development
- O16 Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
- P36 Socialist Institutions and Their Transitions: Consumer Economics; Health; Education and Training: Welfare, Income, Wealth, and Poverty
- Q12 Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
- Q54 Climate; Natural Disasters and Their Management; Global Warming
- Z13 Economic Sociology; Economic Anthropology; Social and Economic Stratification
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