Template-type: ReDif-Paper 1.0 
Author-Name: Mekonnen, Tigist
Author-Email: mekonnen@merit.unu.edu
Author-workplace-name: UNU-MERIT, and Maastricht University
Title: Willingness to pay for agricultural risk insurance as a strategy to adapt 
	 climate change
Abstract: Agricultural production is subject to high risk associated with 
	 environmental and agro-ecological conditions. Farmers continuously make 
	 decisions to mitigate the various adversities. This study evaluates farm 
	 households’ willingness to pay for agricultural risk insurance 
	 intervention introduced in Ethiopia in 2009. A bidding game approach is 
	 used to elicit willingness-to-pay. We use a unique data collected on 
	 farmers’ willingness to pay for production risk insurance covering 1500 
	 farm households. The result from the first willingness to pay response 
	 model shows that on average, farmers are willing to pay a premium of 55 
	 Ethiopian Birr. By increasing the efficiency of our estimation, a 
	 double-bounded dichotomous choice model is estimated in the follow-up 
	 willingness to pay response question. It indicates that farmers are 
	 willing to pay about 67 Ethiopian Birr to insurance coverage. The use of 
	 modern agricultural technologies such as high-yielding variety and 
	 inorganic fertilizer, low rainfall, large family size, and high rainfall 
	 type are potential indicators that determine farmers’ decision to adopt 
	 financial insurance. We also found farmer’s demand for insurance 
	 increases due to the changing extreme weather events. Therefore, the 
	 study provides information to agricultural policy makers and private 
	 companies to promote agricultural insurance and set the premium and 
	 enrollment unit.
Keywords: Risk, uncertainty, technologies, insurance, contingent valuation methods,
	 Ethiopia
Classification-JEL: D22, D81, G22
Series: UNU-MERIT Working Papers
Creation-Date: 20170622
Number: 2017-028
File-URL: https://unu-merit.nl/publications/wppdf/2017/wp2017-028.pdf
File-Format: application/pdf
File-Size: 275 kb
Handle: RePEc:unm:unumer:2017028