Implicit Insurance and Group Risk-Sharing in Technology Adoption: Experiments with Ghanaian Smallholder Farmers
Type
conference paper
Date Issued
2025-08-03
Author(s)
Abstract
Insurance promotes the adoption of high-risk, high-return technologies. Using a lab-in-the-field and a field experiment in Ghana, we hold insurance coverage equal and compare an explicit, separately priced insurance policy to an implicit guarantee embedded in agricultural input credit. Among individual farmers, explicit insurance yields higher adoption of a high-risk, high-return technology than implicit insurance; this difference diminishes among farmers in groups that share the potential farming losses due to the group joint liability. The pattern can be explained by the fact that farmers perceive explicit insurance as offering better protection than the de facto equivalent implicit insurance; this perceived protection gap is smaller for more educated farmers, who better recognize the equivalence of explicit and implicit insurance; farming groups provide within-group risk sharing, which weakens the role of formal insurance. We rule out alternative explanations including differences in relational or social image considerations, dislike of mandatory bundling, and superior understanding within groups.
Event Title
2025 World Risk and Insurance Economics Congress
Event Date
2025.08.03-2025.08.07