The ability of Ethiopian farmers to deal with rainfall risk is scanty due to the extension of land plots and incomplete and inefficient financial markets. Traditional drought insurance is flawed by information asymmetries, high administrative costs, and non-diversifiable risks. Insurance based on indexes is a promising alternative. Working on 120 rural households, we estimate the willingness to pay for a drought weather derivative through a mixed logit model allowing for random preferences. The results suggest that the premium, indemnity, and perceived frequency of drought are important determinants of the take-up. Apparent inconsistencies in behavior can be interpreted as rational choices.

A discrete choice analysis of smallholder farmers' preferences and willingness to pay for weather derivatives: evidence from Ethiopia

VIGANO', Laura;CASTELLANI, Davide;
2014-01-01

Abstract

The ability of Ethiopian farmers to deal with rainfall risk is scanty due to the extension of land plots and incomplete and inefficient financial markets. Traditional drought insurance is flawed by information asymmetries, high administrative costs, and non-diversifiable risks. Insurance based on indexes is a promising alternative. Working on 120 rural households, we estimate the willingness to pay for a drought weather derivative through a mixed logit model allowing for random preferences. The results suggest that the premium, indemnity, and perceived frequency of drought are important determinants of the take-up. Apparent inconsistencies in behavior can be interpreted as rational choices.
journal article - articolo
2014
Vigano', Laura; Castellani, Davide; Tamre, Belaynesh
File allegato/i alla scheda:
File Dimensione del file Formato  
Vigano_Castellani_2014_JABR6.pdf

accesso aperto

Descrizione: publisher's version - versione dell'editore
Versione: publisher's version - versione editoriale
Licenza: Creative commons
Dimensione del file 625.78 kB
Formato Adobe PDF
625.78 kB Adobe PDF Visualizza/Apri
Pubblicazioni consigliate

Aisberg ©2008 Servizi bibliotecari, Università degli studi di Bergamo | Terms of use/Condizioni di utilizzo

Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10446/31098
Citazioni
  • Scopus 13
  • ???jsp.display-item.citation.isi??? ND
social impact