The effective design and implementation of interventions that reduce vulnerability and poverty require a solid understanding of underlying poverty dynamics and associated behavioral responses. Stochastic and dynamic benefit streams can make it difficult for the poor to learn the value of such...

This paper reports the results of behavioral economic experiments conducted in Peru to examine the relationship amongst risk preferences, loan take-up, and insurance purchase decisions. This area-based yield insurance can help reduce people's vulnerability to large scale covariate shocks, and...

Recent theoretical and empirical evidence suggests that risk (especially covariant risk that is correlated across producers) may discourage both the supply of agricultural credit and the willingness of small holders to utilize available credit and enjoy the higher expected incomes credit could...

By shrinking the available menu of loan contracts, asymmetric information can result in two types of nonprice rationing in credit markets. The first is conventional quantity rationing. The second is ‘risk rationing.’ Risk rationed agents are able to borrow, but only under relatively high...

When natural disasters strike in developing countries, households are often forced to choose between preserving assets or consumption: either can result in permanent consequences. In this paper we ask: can insurance transfer risk in a way that reduces the need for households to rely on costly...

We present a novel way to understand the low uptake of index insurance using the interlinked concepts of ambiguity and compound-lottery aversion. Noting that the presence of basis risk makes index insurance a compound lottery, we derive an expression of the willingness to pay (WTP) to eliminate...

Ample evidence exists to suggest that nonlinear asset dynamics can give rise to an environment of poverty traps. When dynamic asset thresholds matter, risk not only affects households ex post, but it also influences ex ante behavior. In this environment some house-holds may have much to gain...

This paper reports the results of behavioral economic experiments conducted in Peru toexamine the relationship amongst risk preferences, loan take-up, and insurance purchase decisions. This area-based yield insurance can help reduce people's vulnerability to large scalecovariate shocks, and can...