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A randomized evaluation of the effects of an agricultural insurance program on rural households’ behavior: evidence from China

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J. Cai
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The provision of weather insurance is a potential way of shielding farmers from weather related shocks and reducing poverty. However, the use of weather insurance is not widespread in many countries. In China, even with a government subsidy of 70 per cent, the take-up of weather insurance is quite low.

This evaluation looked at the impact of financial education, social learning and contract design on the take-up of a new weather insurance product in China. The study found that financial education about insurance increases take-up from 35 per cent to 50 per cent. There were large spillover effects of financial education: farmers who had more friends exposed to financial training performed significantly better on an insurance knowledge test. The study also found that offering a menu of insurance contracts rather than a single contract increased take-up dramatically.