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The Impact of Commercial Rainfall Index Insurance: Experimental Evidence from Ethiopia
Author(s) -
Ahmed Shukri,
McIntosh Craig,
Sarris Alexandros
Publication year - 2020
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.1002/ajae.12029
Subject(s) - index (typography) , product (mathematics) , subsidy , agriculture , crop insurance , promotion (chess) , agricultural economics , business , willingness to pay , economics , geography , geometry , mathematics , archaeology , politics , world wide web , computer science , political science , microeconomics , law , market economy
We present the results of an experiment introducing commercial rainfall index insurance into drought‐prone farming cooperatives in Amhara Region, Ethiopia. We provided a market‐priced rainfall deficit insurance product through producer cooperatives and tested a number of potential ways to kick start private demand. Take up of the insurance at market prices is very low, between 0.5% and 3% across seasons. When we use a randomized experiment to distribute small free insurance contracts to farmers, 39% of subsidized individuals enroll but this fails to stimulate input use, yields, or income, nor does it enhance demand in subsequent seasons. A training and promotion on the product improves uptake and willingness to pay but also does not improve farming outcomes. We conclude with a case study of our efforts to interlink index insurance with credit for agricultural inputs.