AEA Home
AEA

Document Request

You have requested the following article:
Social Networks and the Decision to Insure
Jing Cai, Alain De Janvry, and Elisabeth Sadoulet
American Economic Journal: Applied Economics. Apr 2015, Vol. 7, No. 2: Pages 81-108

Social Networks and the Decision to Insure†

Jing Cai1, Alain De Janvry2 and Elisabeth Sadoulet3

1University of Michigan, 611 Tappan Street, Ann Arbor, MI 48109 (e-mail: )

2University of California at Berkeley, 207 Giannini Hall, Berkeley, CA 94720 (e-mail: )

3University of California at Berkeley, 207 Giannini Hall, Berkeley, CA 94720 (e-mail: )

Abstract

Using data from a randomized experiment in rural China, we study the influence of social networks on weather insurance adoption and the mechanisms through which they operate. To quantify network effects, the experiment provides intensive information sessions about the product to a random subset of farmers. For untreated farmers, the effect of having an additional treated friend on take-up is equivalent to granting a 13 percent reduction in the insurance premium. By varying the information available about peers’ decisions and randomizing default options, we show that the network effect is driven by the diffusion of insurance knowledge rather than purchase decisions. (JEL G22, O12, O16, P36, Q12, Q54, Z13)