Date Added: Oct 2009
The authors report results from a large randomized natural field experiment conducted in southwestern China in the context of insurance for sows. The paper sheds light on two important questions about micro insurance. First, how does access to formal insurance affect farmers' production decisions? Second, what explains the low take-up rate of formal insurance, despite substantial premium subsidy from the government? They find that providing access to formal insurance significantly increases farmers' tendency to raise sows. They argue that this finding also suggests that farmers are not previously insured efficiently through informal mechanisms.