IDEAS home Printed from https://ideas.repec.org/p/cdl/agrebk/qt7568b09m.html
   My bibliography  Save this paper

Subsidy Policies with Learning from Stochastic Experiences

Author

Listed:
  • Cai, Jing
  • de Janvry, Alain
  • Sadoulet, Elisabeth

Abstract

Many new products presumed to be privately beneficial to the poor have a high price elasticity of demand and ultimately zero take-up rate at market prices. This has led gov- ernments and donors to provide subsidies to increase the take-up, with the hope of reducing the subsidies once the value of the product is better known. In this study, we use data from a two-year field experiment in rural China to define the optimum subsidy scheme that can insure a given take-up for a new weather insurance product for rice producers. We estimate both reduced form causal channels and a structural model of learning from stochastic expe- rience which we use to conduct policy simulations. Results show that the optimum current subsidy necessary to achieve a desired level of take-up rate depends on both past subsidy levels and past payout rates, implying that subsidy levels should vary locally year-to-year.

Suggested Citation

  • Cai, Jing & de Janvry, Alain & Sadoulet, Elisabeth, 2016. "Subsidy Policies with Learning from Stochastic Experiences," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt7568b09m, Department of Agricultural & Resource Economics, UC Berkeley.
    • Handle: RePEc:cdl:agrebk:qt7568b09m
    as

    Download full text from publisher

    File URL: https://www.escholarship.org/uc/item/7568b09m.pdf;origin=repeccitec
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Nava Ashraf & James Berry & Jesse M. Shapiro, 2010. "Can Higher Prices Stimulate Product Use? Evidence from a Field Experiment in Zambia," American Economic Review, American Economic Association, vol. 100(5), pages 2383-2413, December.
    2. Jing Cai & Alain De Janvry & Elisabeth Sadoulet, 2015. "Social Networks and the Decision to Insure," American Economic Journal: Applied Economics, American Economic Association, vol. 7(2), pages 81-108, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Andrew Royal, 2017. "Dynamics in risk taking with a low-probability hazard," Journal of Risk and Uncertainty, Springer, vol. 55(1), pages 41-69, August.
    2. Alain de JANVRY & Elisabeth SADOULET & Manzoor DAR & Kyle EMERICK, 2016. "The Agricultural Technology Adoption Puzzle: What Can We Learn From Field Experiments?," Working Papers P178, FERDI.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Anup Malani & Cynthia Kinnan & Gabriella Conti & Kosuke Imai & Morgen Miller & Shailender Swaminathan & Alessandra Voena & Bartosz Woda, 2024. "Evaluating pricing health insurance in lower-income countries: A field experiment in India," IFS Working Papers W24/33, Institute for Fiscal Studies.
    2. Jing Cai & Alain de Janvry & Elisabeth Sadoulet, 2020. "Subsidy Policies and Insurance Demand," American Economic Review, American Economic Association, vol. 110(8), pages 2422-2453, August.
    3. Malani, Anup & Kinnan, Cynthia & Conti, Gabriella & Imai, Kosuke & Miller, Morgen & Swaminathan, Shailender & Voena, Alessandra & Woda, Bartek, 2024. "Evaluating and pricing health insurance in lower-income countries: A field experiment in India," CEPR Discussion Papers 19326, C.E.P.R. Discussion Papers.
    4. Zhao, Anqi & Ding, Peng, 2024. "No star is good news: A unified look at rerandomization based on p-values from covariate balance tests," Journal of Econometrics, Elsevier, vol. 241(1).
    5. Keiko Fukumori & Ayumi Arai & Tomoya Matsumoto, 2022. "Risk Management for Smallholder Farmers: An Empirical Study on the Adoption of Weather-Index Crop Insurance in Rural Kenya," Working Papers 230, JICA Research Institute.
    6. Margaret Miller & Julia Reichelstein & Christian Salas & Bilal Zia, 2015. "Can You Help Someone Become Financially Capable? A Meta-Analysis of the Literature," The World Bank Research Observer, World Bank, vol. 30(2), pages 220-246.
    7. Teresa Molina Millán & Karen Macours, 2017. "Attrition in randomized control trials: Using tracking information to correct bias," FEUNL Working Paper Series novaf:wp1702, Universidade Nova de Lisboa, Faculdade de Economia.
    8. Peter Leopold S. Bergman & Todd Rogers, 2017. "The Impact of Defaults on Technology Adoption, and its Underappreciation by Policymakers," CESifo Working Paper Series 6721, CESifo.
    9. Mbassi, Christophe Martial & Messono, Omang Ombolo, 2023. "Historical technology and current economic development: Reassessing the nature of the relationship," Technological Forecasting and Social Change, Elsevier, vol. 195(C).
    10. B Kelsey Jack, "undated". "Market Inefficiencies and the Adoption of Agricultural Technologies in Developing Countries," CID Working Papers 50, Center for International Development at Harvard University.
    11. Heitzig, Chris & O’Keeffe-O’Donovan, Rossa, 2024. "Spillover Effects and Diffusion of Savings Groups," World Development, Elsevier, vol. 173(C).
    12. Sylvain Chassang & Gerard Padro I Miquel & Erik Snowberg, 2012. "Selective Trials: A Principal-Agent Approach to Randomized Controlled Experiments," American Economic Review, American Economic Association, vol. 102(4), pages 1279-1309, June.
    13. Supriya Tiwari & Pallavi Basu, 2024. "Quasi-randomization tests for network interference," Papers 2403.16673, arXiv.org, revised Oct 2024.
    14. Hoffmann, Bridget, 2018. "Do non-monetary prices target the poor? Evidence from a field experiment in India," Journal of Development Economics, Elsevier, vol. 133(C), pages 15-32.
    15. Shukla, Pallavi & Pullabhotla, Hemant K. & Baylis, Kathy, 2022. "Trouble with zero: The limits of subsidizing technology adoption," Journal of Development Economics, Elsevier, vol. 158(C).
    16. Clare Leaver & Owen Ozier & Pieter Serneels & Andrew Zeitlin, 2021. "Recruitment, Effort, and Retention Effects of Performance Contracts for Civil Servants: Experimental Evidence from Rwandan Primary Schools," American Economic Review, American Economic Association, vol. 111(7), pages 2213-2246, July.
    17. Emerick, Kyle & Kelley, Erin & De Janvry, Alain & Sadoulet, Elisabeth, 2019. "Endogenous Information Sharing and the Gains from Using Network Information to Maximize Technology Adoption," CEPR Discussion Papers 13507, C.E.P.R. Discussion Papers.
    18. Sylvia, Sean & Ma, Xiaochen & Shi, Yaojiang & Rozelle, Scott, 2022. "Ordeal mechanisms, information, and the cost-effectiveness of strategies to provide subsidized eyeglasses," Journal of Health Economics, Elsevier, vol. 82(C).
    19. Florencia Devoto & Esther Duflo & Pascaline Dupas & William Parienté & Vincent Pons, 2012. "Happiness on Tap: Piped Water Adoption in Urban Morocco," American Economic Journal: Economic Policy, American Economic Association, vol. 4(4), pages 68-99, November.
    20. Yasuharu Shimamura & Satoshi Shimizutani & Shimpei Taguchi & Hiroyuki Yamada, 2021. "Economic Valuation of Safe Water from New Boreholes in Rural Zambia: A Coping Cost Approach with Estimates of Internal Rate of Return," Keio-IES Discussion Paper Series 2021-009, Institute for Economics Studies, Keio University.

    More about this item

    Keywords

    Social and Behavioral Sciences; Subsidy; Insurance; Take-up; Stochastic Learning;
    All these keywords.

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cdl:agrebk:qt7568b09m. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Lisa Schiff (email available below). General contact details of provider: https://edirc.repec.org/data/dabrkus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.