Evaluation of Pakistani farmers’ willingness to pay for crop insurance using contingent valuation method: The case of Khyber Pakhtunkhwa province

Shah Fahad and Wang Jing

Land Use Policy, 2018, vol. 72, issue C, 570-577

Abstract: In Pakistan, agriculture is susceptible to numerous risks, particularly in flood prone areas. Crop insurance could act as an effective tool for managing risks in Pakistan. For many years, the country has confronted with the losses from natural disasters without crop insurance. This study aims to examine the willingness of Pakistani farmers to pay for insurance premiums by conducting a household survey. Primary data of 600 farmers were collected in the four flood prone districts namely Charsadda, Peshawar, Mardan and Nowshera of Khyber-Pakhtunkhwa (KP) province of Pakistan. In a rural farm-household survey, residents of the study area were asked about their preferences for a hypothesized crop insurance program using contingent valuation (CV) method by asking their willingness to pay (WTP) for crop insurance to eradicate forthcoming disaster risks. Multiple linear regression model was utilized to check construct validity and reliability of the WTP estimates. The outcomes of the study revealed that about 30% of the participants accepted the concept of crop insurance as the mechanism for disaster risk reduction. Our findings reveal that the severity and frequency of past weather associated extremes, farm typology, socio-economic settings, and the ability of farming communities to pay should be considered while introducing crop insurance programs in the region. Moreover, disseminating awareness in farming communities regarding the futures changes in climate and the related risks of the existence of extreme weather incidences is important. The government support to subsidize insurance schemes might increase the need for crop insurance among subsistence farmers in and cushion them against adverse effects arising from such extreme weather conditions for sustenance of livelihoods.

Keywords: Willingness to pay; Flood risk; Crop insurance; Contingent valuation method; Pakistan (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (17)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:lauspo:v:72:y:2018:i:c:p:570-577

DOI: 10.1016/j.landusepol.2017.12.024

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