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The Impact of Commercial Rainfall Index Insurance: Experimental Evidence from Ethiopia

Shukri Ahmed, Craig McIntosh and Alexandros Sarris

American Journal of Agricultural Economics, 2020, vol. 102, issue 4, 1154-1176

Abstract: We present the results of an experiment introducing commercial rainfall index insurance into drought‐prone farming cooperatives in Amhara Region, Ethiopia. We provided a market‐priced rainfall deficit insurance product through producer cooperatives and tested a number of potential ways to kick start private demand. Take up of the insurance at market prices is very low, between 0.5% and 3% across seasons. When we use a randomized experiment to distribute small free insurance contracts to farmers, 39% of subsidized individuals enroll but this fails to stimulate input use, yields, or income, nor does it enhance demand in subsequent seasons. A training and promotion on the product improves uptake and willingness to pay but also does not improve farming outcomes. We conclude with a case study of our efforts to interlink index insurance with credit for agricultural inputs.

Date: 2020
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Handle: RePEc:wly:ajagec:v:102:y:2020:i:4:p:1154-1176