(with B. Perez-Viana & A. Verschoor) Informal Risk Sharing and Demand for Index Insurance: Experimental Evidence from Rural Uganda
Index insurance holds promise for smallholder farmers in developing countries but its value is limited by basis risk: the imperfect correlation between the index and actual losses. Theory shows that informal sharing of basis risk may complement index insurance and raise demand or it may substitute for it and lower demand. We designed an experiment to study the effect of basis risk sharing on demand for index insurance and implemented it among Ugandan farmers. We find that demand for index insurance responds negatively to basis risk sharing. The most plausible explanation is the strong informal risk sharing response that results fromthe presence of basis risk.(with C. Gutekunst & A. Riedl) Coordination and Network-based Proximity: Experimental Evidence from the FieldÂ
We conduct a field experiment in real-world social networks to analyse the influence of network proximity on the ability of two persons to coordinate costly effort. Using data on the friendship networks of 22 villages in Uganda, we identify the effect of proximity between two participants by experimentally varying the effort costs and the disclosure of their identities. We find that effort in the coordination task is higher if the paired participants are friends and have common friends, i.e., they are part of the same triad. We do not find support for alternative measures of network proximity that involve a different combination of direct and common friends.