Crowding-out Effects of Microinsurance and Solidarity: A Study by Artefactual Experiment in Cambodia

This study investigates whether take-up of microinsurance has crowding-out effects on solidarity for informal insurance and whether sentiments that are the fundamental cause of solidarity discourage take-up of microinsurance. We implement a solidarity game experiment in rural Cambodia to answer the following questions. Do experiment subjects who purchase insurance or know that microinsurance is adopted by other subjects decrease income transfers for other subjects Do subjects who know that microinsurance is introduced and can be adopted by anonymous subjects decrease income transfers for other subjects? Does microinsurance reduce (increase) income transfers due to crowding effects, even if it is removed? Lastly, if solidarity is stronger among group members, are members less likely to adopt microinsurance? The results surprisingly show that crowding-in information effects exist, while framing effects do not. In addition, solidarity has a negative impact on take-up of microinsurance, and information crowding-in effects disappear after microinsurance is removed.