Early-life disaster experience and commercial insurance demand: evidence from the Great Famine in China

We examine the impact of early-life famine experiences on commercial insurance demand in this paper. Using household-level data from China, we show that household heads' famine experiences in early adulthood have a causal relationship with the household's commercial insurance demand. When the famine severity increases by one standard deviation, the probability of the household purchasing insurance rises by 2.97%, and the premium expense increases by 23.04%. The results remain robust when we account for alternative definitions of cohorts and famine severity measurements and migration after the Great Famine. Finally, we show that the mechanism behind the causative effects is due to the Great Famine-related change in risk preference. After the famine, people became more risk averse and more likely to buy commercial insurance in their later life.