Do caste and social interactions affect risk attitudes and adoption of microinsurance? Evidence from rainfall insurance adoption in Gujarat, India

Description: 

Agriculture is a risky enterprise and farmers’ risk bearing capacity as well as their risk management strategies are determined by their risk preferences or risk attitudes. Risk preferences of the farmers are central to agricultural decision making in the context of adoption of new technology and agricultural innovations. Risk factors are also critical in determining the consequences of risk on household welfare. Having acknowledged the importance of risk attitude of farmers, a question that emerges is: does an individual’s cultural and social affiliation shape his/her risk attitude? In this paper, the authors argue that for an improved understanding of the market for microinsurance, it is necessary to understand the social context within which risk attitudes are formed and participation decisions are made. Given the scarcity of empirical evidence on the relationship between social affiliation, social interaction, risk attitudes and market participation in the context of microinsurance, the paper estimates the impact of caste affiliation and social interaction on farmers’ risk attitudes using micro-data of rural farm households from the Indian state of Gujarat. Both, caste affiliation and social interaction are found to significantly affect the risk attitudes of farmers.

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Author: 

Ashish Singh, Sarthak Gaurav, Thiagu Ranganathan

Publisher: 

ILO

Number of pages: 

25

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