Nov 4, 2012

Natural disasters and insurance (Vietnam)

. . . [H]ouseholds highly affected by weather volatility show a long-term risk aversion and are more willing to buy insurance to protect crop losses. The finding also supports the hypothesis that when people are used to live in a risky environment, an incremental increase in risk affects their risk preferences less.
That is the abstract of the working paper "On the Sources of Risk Preferences in Rural Vietnam" by Dang (October 2012).

Haiti comes to mind, its history of natural disasters is well known but insurance is not common. Haitians' average income might be too low to buy insurance. Another explanation is that the demand is there but the supply isn't.  

HT: Matthew Baker.

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