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Insurance for Technology Adoption: An Experimental Evaluation of Schemes and Subsidies with Maize Farmers in Mexico
Author(s) -
Freudenreich Hanna,
Mußhoff Oliver
Publication year - 2018
Publication title -
journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.157
H-Index - 61
eISSN - 1477-9552
pISSN - 0021-857X
DOI - 10.1111/1477-9552.12226
Subject(s) - indemnity , subsidy , index (typography) , risk aversion (psychology) , actuarial science , crop insurance , basis risk , business , risk pool , auto insurance risk selection , insurance policy , key person insurance , agricultural economics , economics , agriculture , expected utility hypothesis , finance , financial economics , computer science , capital asset pricing model , world wide web , market economy , ecology , biology
For farmers in developing countries, the combination of both risk aversion and the lack of insurance is often a major impediment to adoption of productivity‐enhancing technologies, such as higher yielding hybrid seed. In a framed field experiment with Mexican maize farmers, we investigate whether bundling hybrid seed with an insurance scheme can increase its adoption, while also controlling for risk aversion. We test insurance schemes with different levels of risk coverage and premium subsidies and find that (1) all schemes significantly increase the degree of adoption of the higher yielding seed, (2) partial insurance schemes perform worse than full insurance, (3) weather index insurance with geographical basis risk performs no worse than indemnity insurance, and (4) premium subsidies significantly increase the adoption effect of indemnity insurance, but not that of index insurance.