In developing countries, unexpected income shocks are common but informal insurance is typically incomplete. An important question is therefore whether risk-sharing within the household is effective. This paper presents results from a field experiment with 142 married couples in Kenya in which individuals were given random income shocks. Even though the shocks were small relative to lifetime income, men
increase private consumption when they receive the shock but not when their wives do, a rejection of efficiency. Such behavior is not specific to the experiment—both spouses spend more on themselves when their labor income is higher. (JEL D14, D81, G22, O12, O16)
"Limited Insurance within the Household: Evidence from a Field Experiment in Kenya."
American Economic Journal: Applied Economics,
Criteria for Decision-Making under Risk and Uncertainty
Insurance; Insurance Companies
Microeconomic Analyses of Economic Development
Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance