ARE Professors deJanvry and Sadoulet Publish in AER with ARE Alumna ('09) Jing Cai

July 29, 2020

This American Economic Review paper shows results indicating that subsidies increase future insurance take-up through their influence on payout experiences. Exploring mechanisms of the payout effect, they find that for households that randomly benefited from financial education, receiving a payout provides a one-time learning experience that improves take-up permanently. In contrast, households with poor insurance knowledge continuously update take-up decisions based on recent experiences with disasters and payouts. The authors conclude that combining subsidy policies with financial education can be effective in promoting long-run insurance adoption.