Research

Do Risk and Time Preference Explain Household Demand for Microinsurance? A Lab-in-the-Field Approach

Microinsurance take-up remains puzzlingly low across the Global South despite being a key instrument for managing risk and vulnerability among low-income households. Using panel data with incentivised lab-in-the-field experiments across five rural villages in India, this paper finds that most individuals are risk- and loss-averse, underweight large-probability events, and are present-biased. Impatience is associated with lower insurance take-up, while risk-seeking behaviour and prior shocks — such as a death in the family — predict higher take-up.

Are Risk and Time Preferences Stable? Evidence from Lab-in-the-Field in India

Standard economic theory assumes stable preferences, a claim recent experimental literature has questioned. Drawing on three waves of surveys and lab-in-the-field experiments conducted between 2016 and 2020 in five rural Indian villages, this paper finds a positive association in risk-preference responses over time but none for time preference. Households below the poverty line are more risk-seeking than those above it, and shocks such as illness, job loss or bereavement are linked to greater risk aversion, while crop failure and unemployment are linked to greater patience.