Risk and ambiguity aversion behaviour in index-based insurance uptake decisions: Experimental evidence from EthiopiaBelissa, T. K., Lensink, R. & van Asseldonk, M., 3-Aug-2019, In : Journal of Economic Behavior & Organization.
Research output: Contribution to journal › Article › Academic › peer-review
Index-based insurance (IBI) is an innovative pro-poor climate risk management strategy that suffers from low uptake. Evidence on the role of behavioral impediments in adoption of IBI is scant. We conducted lab-in-the-field experiments with 1139 smallholders out of whom 596 have adopted IBI in Ethiopia to elicit their risk and ambiguity aversion behavior, and examine whether risk and/or ambiguity aversion can explain actual IBI uptake decisions. Our study suggests that an increase in risk-aversion increases uptake, but an increase in ambiguity-aversion lowers uptake of IBI. We also find evidence that an increase in risk aversion speeds-up the uptake of IBI, while an increase in ambiguity aversion delays the adoption of IBI.
|Journal||Journal of Economic Behavior & Organization|
|Early online date||3-Aug-2019|
|Publication status||E-pub ahead of print - 3-Aug-2019|