| By: |
Mekonnen, Tigist (UNU-MERIT, and Maastricht University) |
| Abstract: |
Agricultural production is subject to high risk associated with environmental
and agro-ecological conditions. Farmers continuously make decisions to
mitigate the various adversities. This study evaluates farm households’
willingness to pay for agricultural risk insurance intervention introduced in
Ethiopia in 2009. A bidding game approach is used to elicit
willingness-to-pay. We use a unique data collected on farmers’ willingness to
pay for production risk insurance covering 1500 farm households. The result
from the first willingness to pay response model shows that on average,
farmers are willing to pay a premium of 55 Ethiopian Birr. By increasing the
efficiency of our estimation, a double-bounded dichotomous choice model is
estimated in the follow-up willingness to pay response question. It indicates
that farmers are willing to pay about 67 Ethiopian Birr to insurance coverage.
The use of modern agricultural technologies such as high-yielding variety and
inorganic fertilizer, low rainfall, large family size, and high rainfall type
are potential indicators that determine farmers’ decision to adopt financial
insurance. We also found farmer’s demand for insurance increases due to the
changing extreme weather events. Therefore, the study provides information to
agricultural policy makers and private companies to promote agricultural
insurance and set the premium and enrollment unit. |
| Keywords: |
Risk, uncertainty, technologies, insurance, contingent valuation methods, Ethiopia |
| JEL: |
D22 D81 G22 |
| Date: |
2017–06–22 |
| URL: |
http://d.repec.org/n?u=RePEc:unm:unumer:2017028&r=dcm |