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

Ahmed Shukkri, McIntosh Craig and Sarris Alexandros
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Ahmed Shukkri: FERDI
McIntosh Craig: University of California at San Diego
Sarris Alexandros: University of Athens

Working Papers from FERDI

Abstract: We present the results of an experiment introducing commercial rainfall index insurance into drought-plagued farming cooperatives in Amhara State, Ethiopia. We introduce a market-priced rainfall deficit insurance product through producer cooperatives, and test a number of potential ways to kick-start private demand. Takeup of the insurance at market prices is very low, between .5% and 3% across seasons, but a low-cost promotion at baseline increases willingness to pay for multiple 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, and nor does it enhance demand in subsequent seasons. Our experience in interlinking credit with insurance shows that while serious logistical challenges need to be overcome, real demand can exist for state-contingent credit in this context.

Keywords: Index Insurance; Randomized Experiments; Ethiopian Agriculture (search for similar items in EconPapers)
JEL-codes: O13 G22 C93 (search for similar items in EconPapers)
Date: 2017-08
New Economics Papers: this item is included in nep-exp and nep-ias
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