The effect of weather index insurance on social capital: Experimental evidence from Ethiopia

Halefom Y. Nigus, Eleonora Nillesen, Pierre Mohnen

Research output: Working paperOther research output

Abstract

In this study, using data from lab-in-the-field experiment, we explore whether the introduction of weather index insurance crowds in or crowds out social capital in northern Ethiopia. We use contributions in the public good game as a measure of social capital. We find that weather index insurance crowds out social capital. The free-riding problem created by the positive externality of weather index insurance and development of self-sufficiency behaviour are found to be the causal mechanisms behind the crowding out phenomenon. Our results indicate that formal insurance mechanisms do not occur in a vacuum and may have unintended effects. Hence, this study suggests that novel insurance product design and marketing strategies should be used to ameliorate such unintended effects.
Original languageEnglish
Place of PublicationMaastricht
PublisherUNU-MERIT working papers
Number of pages35
Volume2018-007
Publication statusPublished - 2018

Publication series

SeriesUNU-MERIT Working Papers
Number2018-007

JEL classifications

  • c93 - Field Experiments
  • g22 - "Insurance; Insurance Companies"
  • h41 - Public Goods
  • o17 - "Formal and Informal Sectors; Shadow Economy; Institutional Arrangements"

Keywords

  • weather index insurance
  • social capital
  • public good game
  • Ethiopia

Cite this