Do No Harm? The Welfare Consequences of Behavioral Interventions

• Departmental Seminar

Date and Location

Monday, February 24, 2020, 4:10 PM - 5:30 PM
ARE Library Conference Room, 4101 Social Sciences and Humanities

Abstract

We apply two insights into the behavioral economics of index insurance to try to improve the products that are being offered. The first insight is a recognition that many of the conventional, observable measures of individual welfare, such as product take-up, are not in fact measuring welfare when we allow for the preferences and beliefs that are actually driving choices to purchase or not. A corollary of this insight is to ensure that we include the welfare effects of those that do not purchase the insurance, rather than just those that do. The second insight is that heterogeneity of welfare impact might be a general basis for normatively designing better, conditional interventions. Rather than just providing one-size-fits-all interventions, our behavioral interventions will be tailored to provide specific interventions designed for the behavioral characteristics of those making insurance decisions. These are “behaviorally smart” conditional interventions, not unconditional “nudges.” These insights are applied in the field to establish a “proof of concept,” using an Index Based Livestock Insurance product for pastoralists in Ethiopia. This is a setting and product that our team has long, established familiarity with, making it easier to reliably apply these new insights.