Insurance and Private Transfers - Experimental Evidence

• Applicant: Professorin Dr. Susan Steiner
• Subject Area: Economic Policy, Applied Economics
• Term: from 2014 to 2017
• Project identifier: Deutsche Forschungsgemeinschaft (DFG) - Project number 266876538

Most people in developing countries are currently not insured; they therefore depend on private transfers from relatives and friends when hit by a shock. However, the provision of insurance is steadily increasing. An important question is to what extent the possibility to purchase insurance affects the willingness to help others. Previous research shows contradicting effects: some studies find a decrease in private transfers, others an increase. The underlying drivers remain unclear. Guided by the literature on other-regarding preferences, the proposed project investigates two potential mechanisms that work in opposite directions. On the one hand, an insured individual might be more willing to provide transfers to the uninsured because she perceives them as more vulnerable compared to herself (change in relative economic security). On the other hand, an insured individual might reduce her transfers to the uninsured holding them accountable for not taking up insurance themselves (change in individual responsibility).We analyze these mechanisms in a framed field experiment combined with a household survey on transfer behavior within social networks. We conduct the project in several villages in Cambodia. We collaborate with the Social Health Protection Association, a non-governmental organization that promotes community-based health insurance. We collect data in two phases. In the first phase, we conduct a detailed household survey in the villages with a main focus on social networks. We use the survey data to investigate the determinants of actual transfer behavior within the networks, paying special attention to the role of insurance prevalence and usage as well as perceptions of self-responsibility.In the second phase, we conduct an experiment in the same villages. This experiment is based on a modified version of the solidarity game. In several groups, two players are teamed up. Both players are equipped with an endowment, part of which they can lose again. The players decide how much they would transfer to their partner, if the partner loses. We vary between groups whether and in what form players can get insured. This allows us to analyze the effect of a change in relative economic security and the effect of a change in individual responsibility. We combine the experimental data with the survey data to analyze how the network position of players affects their behavior in the experiment. Furthermore, we will contrast the transfers made in the experiment with the pattern of actual transfers made within the social networks.

• DFG Programme: Research Grants
• Co-Investigators: Dr. Friederike Lenel; Professor Georg Weizsäcker, Ph.D.