Working Paper #2018-007
The effect of weather index insurance on social capital: Experimental evidence from Ethiopia
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.
- Keywords
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- Weather index insurance
- social capital
- public good game
- Ethiopia
- JEL codes
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- C93
- G22
- H41
- O17
Cite this as
APA 7th ed.Nigus, H., Nillesen, E., & Mohnen, P. (2018). The effect of weather index insurance on social capital: Experimental evidence from Ethiopia (UNU-MERIT Working Paper No. 2018-007). UNU-MERIT. https://unu-merit.nl/publications/working-papers/abstract/?id=7633