Are subsidies to weather-index insurance the best use of public funds? A bio-economic farm model applied to the Senegalese groundnut basin

Aymeric Ricome (), François Affholder, Françoise Gérard, Bertrand Muller, Charlotte Poeydebat (), Philippe Quirion and Moussa Sall ()
Additional contact information
Aymeric Ricome: JRC - European Commission - Joint Research Centre [Ispra]
François Affholder: Cirad - Centre de Coopération Internationale en Recherche Agronomique pour le Développement
Françoise Gérard: UPR GREEN - Gestion des ressources renouvelables et environnement - Cirad - Centre de Coopération Internationale en Recherche Agronomique pour le Développement
Bertrand Muller: LEPSE - Écophysiologie des Plantes sous Stress environnementaux - INRA - Institut National de la Recherche Agronomique - Montpellier SupAgro - Centre international d'études supérieures en sciences agronomiques - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier
Moussa Sall: ISRA - Institut sénégalais de recherches agricoles [Dakar]

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Abstract: While crop yields in Sub-Saharan Africa are low compared to most other parts of the world, weather-index insurance is often presented as a promising tool, which could help resource-poor farmers in developing countries to invest and adopt yield-enhancing technologies. Here, we test this hypothesis on two contrasting areas (in terms of rainfall scarcity) of the Senegalese groundnut basin through the use of a bio-economic farm model, coupling the crop growth model CELSIUS with the economic model ANDERS, both specifically designed for this purpose. We introduce a weather-index insurance whose index is currently being used for pilot projects in Senegal and West Africa. Results show that insurance leads to a welfare gain only for those farmers located in the driest area. These farmers respond to insurance mostly by increasing the amount of cow fattening, which leads to higher crop yields thanks to the larger production of manure. We also find that subsidizing insurance is not the best possible use of public funds: for a given level of public funding, reducing credit rates, subsidizing fertilizers, or just transferring cash as a lump-sum generally brings a higher expected utility to farmers and leads to a higher increase in grain production levels.

Date: 2017-09
New Economics Papers: this item is included in nep-agr, nep-dev, nep-env, nep-ias and nep-knm
Note: View the original document on HAL open archive server: https://hal.science/hal-01679763v1
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Published in Agricultural Systems, 2017, 156, pp.149 - 176. ⟨10.1016/j.agsy.2017.05.015⟩

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Journal Article: Are subsidies to weather-index insurance the best use of public funds? A bio-economic farm model applied to the Senegalese groundnut basin (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01679763

DOI: 10.1016/j.agsy.2017.05.015

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