The gains from insurance arise from the transfer of income across states. Yet, by requiring that the premium be paid up front, standard insurance products also transfer income across time. We show that this intertemporal transfer can help explain low insurance demand, especially among the poor, and in a randomized control trial in Kenya we test a crop insurance product which removes it. The product is interlinked with a contract farming scheme: as with other inputs, the buyer of the crop offers the insurance and deducts the premium from farmer revenues at harvest time. The take-up rate for pay-at-harvest insurance is 72 percent, compared to 5 percent for the standard pay-up-front contract, and the difference is largest among poorer farmers. Additional experiments and outcomes provide evidence on the role of liquidity constraints, present bias, and counterparty risk, and find that enabling farmers to commit to pay the premium just 1 month later increases demand by 21 percentage points. (JEL G22, I32, O13, O16, Q12, Q14)
The incentives of political agents to enforce tax collection are key determinants of the levels of compliance. We study the electoral response to the Ghost Buildings program, a nationwide anti-tax evasion policy in Italy that used innovative monitoring technologies to target buildings hidden from tax authorities. Two million buildings were registered as a result of the program. Our difference-in-differences identification strategy exploits both variation across towns in the ex-ante program scope to increase enforcement as well as administrative data on actual building registrations. Local incumbents experience an increase in their reelection likelihood as a consequence of the policy. In addition, these political returns are higher in areas with lower tax evasion tolerance and with higher speed of public good provision, implying complementarity among enforcement policies, the underlying tax culture, and government efficiency. * Lorenzo Casaburi, casaburi@stanford.edu. Ugo Troiano, troiano@umich.edu. We are indebted to the Agenzia del Territorio that provided the administrative data used in this paper. We wish to thank
Despite extensive evidence that preferences are often time-inconsistent, there is only scarce evidence of willingness to pay for commitment. Infrequent payments for frequently provided goods and services are a common feature of many markets and they may naturally provide commitment to save for lumpy expenses. Multiple experiments in the Kenyan dairy sector show that: (i) farmers are willing to incur sizable costs to receive infrequent payments as a commitment device, (ii) poor contract enforcement, however, limits competition among buyers in the supply of infrequent payments. We then present a model of demand and supply of infrequent payments and test its additional predictions. (JEL K12, L66, O13, O17, Q12, Q13)
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