TY - JOUR
T1 - Background Risk of Food Insecurity and Insurance Behaviour
T2 - Evidence from the West Bank
AU - Cavatorta, Elisa
AU - Pieroni, Luca
PY - 2013/12
Y1 - 2013/12
N2 - This paper explores behavioural changes resulting from the presence of a uninsurable background risk. Due to markets incompleteness, not all risks are insurable. We empirically test the theory (and the intuition) suggesting that people bearing an uninsurable background risk are less willing to bear other insurable risks and therefore increase their demand for insurance against insurable risks. We present a case study on the Palestinian Territories. We consider the implications of a background risk of food insecurity, a major formally uninsurable risk, using nationally representative household data. Using a bivariate probit model, we find that exposure to severe food insecurity risk increases the propensity to insure against health risks, and this propensity is increasing in background risk intensity. Our findings point to possible incentive changes towards the desirability of insurance that have implications for policy design.
AB - This paper explores behavioural changes resulting from the presence of a uninsurable background risk. Due to markets incompleteness, not all risks are insurable. We empirically test the theory (and the intuition) suggesting that people bearing an uninsurable background risk are less willing to bear other insurable risks and therefore increase their demand for insurance against insurable risks. We present a case study on the Palestinian Territories. We consider the implications of a background risk of food insecurity, a major formally uninsurable risk, using nationally representative household data. Using a bivariate probit model, we find that exposure to severe food insecurity risk increases the propensity to insure against health risks, and this propensity is increasing in background risk intensity. Our findings point to possible incentive changes towards the desirability of insurance that have implications for policy design.
U2 - 10.1016/j.foodpol.2013.09.019
DO - 10.1016/j.foodpol.2013.09.019
M3 - Article
SN - 0306-9192
VL - 43
SP - 278
EP - 290
JO - FOOD POLICY
JF - FOOD POLICY
ER -