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Drought‐tolerant rice, weather index insurance, and comprehensive risk management for smallholders: evidence from a multi‐year field experiment in India
Author(s) -
Ward Patrick S.,
Makhija Simrin,
Spielman David J.
Publication year - 2020
Publication title -
australian journal of agricultural and resource economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.683
H-Index - 49
eISSN - 1467-8489
pISSN - 1364-985X
DOI - 10.1111/1467-8489.12342
Subject(s) - subsidy , cultivar , product (mathematics) , index (typography) , purchasing , agriculture , agricultural economics , risk management , economics , scale (ratio) , business , production (economics) , natural resource economics , agronomy , geography , marketing , biology , mathematics , ecology , computer science , finance , geometry , macroeconomics , world wide web , market economy , cartography
In rainfed production systems throughout India, agricultural activities are dependent upon the summer monsoon, and any aberration in monsoon rainfall patterns can have severe consequences for rice production. There is considerable policy interest in designing programs to lower small‐scale farmers’ exposure to these types of risk given the regularity with which adverse monsoon events occur. This paper introduces a field experiment conducted with two risk management options in the state of Odisha: a drought‐tolerant rice cultivar; and a weather index insurance product designed to complement the performance of the cultivar. Uptake rates for the cultivar itself and for the joint product are compared across two years alongside an analysis of factors that predict uptake. Results indicate high levels of demand for both the products, albeit with a significant degree of price sensitivity. But this sensitivity is agnostic to the nature of price reductions, suggesting that public investments that lower the costs of risk management may be sufficient to encourage broad uptake, without necessarily relying upon distortionary subsidies as is so often done. Sustained demand between years one and two is primarily explained where individuals were indemnified in year one and had a large number of peers also purchasing the product.