Risk, ambiguity and willingness to participate in crop insurance programs: Evidence from a field experiment

Williams Ali, Awudu Abdulai, Renan Goetz and Victor Owusu

Australian Journal of Agricultural and Resource Economics, 2021, vol. 63, issue 03

Abstract: This paper analyses smallholder farmers’ willingness to participate in crop insurance programs, using recent data from cocoa farmers in Ghana. Given the significance of output uncertainty and imperfect capital and insurance markets, we develop a theoretical framework to analyse how risk and ambiguity aversion, and liquidity constraints influence farmers’ crop insurance participation decisions. We employ field experiments to elicit farmers’ ambiguity and risk aversion, the stated preference approach to obtain information on farmers’ willingness to participate in crop insurance programs, and a discrete choice model to examine the factors that influence their participation decisions. We find that risk preferences, ambiguity aversion, and liquidity constraints influence farmers’ willingness to participate in crop insurance programs. The results also reveal that the probability of participating in crop insurance programs is positively influenced by wealth, trust and education of the farmers.

Keywords: Crop Production/Industries; Risk and Uncertainty (search for similar items in EconPapers)
Date: 2021
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Journal Article: Risk, ambiguity and willingness to participate in crop insurance programs: Evidence from a field experiment (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aareaj:342968

DOI: 10.22004/ag.econ.342968

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