Microinsurance, Trust and Economic Development: Evidence from a Randomized Natural Field Experiment∗

How does access to formal microinsurance affect economic development? We report results from a large randomized natural field experiment conducted in southwestern China in the context of insurance for sows. We find that providing access to formal insurance significantly increases farmers’ tendency to raise sows. We argue that this finding also suggests that farmers are not previously efficiently insured through informal mechanisms. We also provide several pieces of evidence suggesting that trust, or lack thereof, for government-sponsored insurance products is a significant barrier for farmers’ willingness to participate in the formal insurance program, despite partial premium subsidy from the government.