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Self-Protection from Weather Risk using Improved Maize Varieties or Off-Farm Income and the Propensity for Insurance

Sebastain Awondo (), Octavio Ramirez, Gregory Colson, Genti Kostandini and Esendugue Fonsah ()

No 206226, 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California from Agricultural and Applied Economics Association

Abstract: We investigate how self-protection from the adoption of Improved Maize Varieties (IMV) and off-farm income affects risk premiums for smallholder maize producers in Uganda. To unbundle these effects, we specify the cost of risk to explicitly capture four risk components - mean, variance, skewness and kurtosis. Using unique plot-level panel data for Uganda, we estimate and test moments of a flexible production function based on an expanded form of the Johnson SU family distribution and proceed to simulate the degree of responsiveness of risk premiums and welfare estimates to marginal changes in the share of land under IMV and off-farm income. Scenarios of joint adoption of IMV accompanied with low and high application of inorganic fertilizer, and the effect of off-farm income when there is high and low supply of farm labor are examined. Results show that the use of IMV and off-farm income substantially reduces risk premiums and the individual effect is much higher under low fertilizer application and high supply of farm labor, respectively. Thus implying that self-protection is likely to reduce the propensity for index insurance especially if its design fails to consider the reduction in downside risk.

Keywords: Agricultural and Food Policy; International Development; Risk and Uncertainty (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-agr and nep-ias
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Journal Article: Self†protection from weather risk using improved maize varieties or off†farm income and the propensity for insurance (2017) Downloads
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DOI: 10.22004/ag.econ.206226

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