Willingness to Pay for Farm Insurance by Smallholder Cocoa Farmers in Ghana
01 Jan 2014-
TL;DR: In this article, the willingness to pay for cocoa price insurance in the Ghanaian cocoa industry using contingent valuation (CV) method to collect primary data from 201 cocoa farmers in Bibiani-Anhiawso-Bekwai district, Ghana.
Abstract: This study analyzes the willingness to pay for cocoa price insurance in the Ghanaian cocoa industry using contingent valuation (CV) method to collect primary data from 201 cocoa farmers in Bibiani-Anhiawso-Bekwai district, Ghana. The study employed descriptive statistics to analyze the demographic characteristics of the sampled farmers in the study area. 57.71 percent of the sampled cocoa farmers were found to respond positively to cocoa price insurance. Independent double-hurdle model was used to determine factors influencing farmer’s adoption of cocoa price insurance and the premium farmers are willing to pay. Empirical results from the study revealed that farmers interest in cocoa price insurance was affected by range of explanatory variables such as marital status, number of years in cocoa farming, educational attainment, household size, farm size, ownership of farm land for farming, age of cocoa farm, age squared of cocoa farm, farmers being aware of the insurance scheme and income from cocoa farm. On the other hand, the premium farmers were willing to pay was significantly influence by marital status, educational attainment, ownership of farm land for farming, farmer’s awareness of insurance scheme and income from cocoa farm. Cocoa farmers are on average willing to pay between 9.3% and 10.5% of the option value they intend to receive as premium depending on the value. The study recommends that particular attention be given to education of farmers on the significance of insuring their cocoa farms.
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TL;DR: In this paper, the authors found that approximately 84% of farmers were interested in purchasing area-based crop yield insurance and were, on average, willing to pay a premium of USD 42.42/ha/cropping season for paddy rice, and USD 29.52/h/season for wheat.
38 citations
TL;DR: In this paper, the authors analyzed farmer's perceptions on climate change, their willingness to insure their farms and their recovery from or resilience to climate shocks, and concluded that most of the farmers recover faster from climate shocks as nearly all the farmers indicated an ability to recover from climate shock with shorter time periods.
Abstract: This study analysed farmer’s perceptions on climate change, their willingness-to-insure their farms and their recovery from or resilience to climate shocks. This involved 209 farmers that were selected through a multistage sampling procedure in the Northern region of Ghana. The data was analysed using double hurdle and ordered probit regressions. From the result, the study established that most of the farmers were willing-to-insure their farms and were willing-to-pay a positive price for farm insurance. The decision to insure farm was significantly influenced by education, farmer group membership and floods. On the other hand, farmer group membership, remitters, windstorm, climate perception and location in a rich class district, extension access, commercial production, floods, drought and off-farm diversification significantly influenced the premium farmers were willing to pay. It is concluded that most of the farmers recover faster from climate shocks as nearly all the farmers indicated an ability to recover from climate shocks with shorter time periods. Generally, the factors that had significant effect on the recovery period of the farmers were age, education, number of children, access to extension service, contract farming, farmer group membership, farm size, sex, number of household adults, access to credit and farm insurance. Therefore, farm insurance is an important strategy of making farming households recover faster from climate shocks. As such, there is the need to introduce farm insurance policies to crop farmers in the region at an agreed price between farmers and insurance providers.
22 citations
TL;DR: Regression results indicate that contact with extension agents and access to credit positively and significantly influenced the probability that a farmer would be willing to pay more for Aflasafe than the threshold price.
20 citations
Cites result from "Willingness to Pay for Farm Insuran..."
...This result is in line with findings of previous studies in which the respondent’s education status influenced his or her WTP because he or she was better informed about agricultural technologies (4, 6, 11, 25)....
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TL;DR: In this paper, the authors used a dichotomous contingent valuation method to elicit the willingness to pay for crop insurance among cereal farmers in the Eastern region of Ghana and found that 52.9% of the farmers expressed interest in crop insurance.
Abstract: Crop insurance is a risk management tool with the potential of dealing with risk more efficiently, the study uses a dichotomous contingent valuation method to elicit the willingness to pay for crop insurance among cereal farmers in the Eastern region of Ghana. The study employed descriptive statistical techniques to analyse primary data obtained from 208 sampled farmers in the region. Approximately, 52.9% of the farmers expressed interest in crop insurance. A Heckman two stage approach was employed to estimate the factors influencing the WTP for crop insurance. The results revealed that farmers were willing to pay approximately GHc 69.6 per cropping season. The demand for insurance was found to be negatively correlated with the premium amounts suggesting that it is a normal good. The Probit model revealed that marital status, education, borrowing, and awareness of crop insurance influenced farmers willingness to purchase insurance. Farmers WTP amount estimated with the interval regression model was shown to be influenced by key variables such as age, crop type, farm size, farm experience, income, weather variation, savings and access to extension agents. Innovative insurance products and the appropriate distribution channels are also recommended to incite demand for crop insurance.
18 citations
Cites background or result from "Willingness to Pay for Farm Insuran..."
...458 tation and is also consistent with other studies (Danso-Abbeam et al., 2014)....
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...Danso-Abbeam et al. (2014) studied cocoa farmers’ willingness to pay for farm insurance in the Western region of Ghana using the dichotomous contingent valuation approach....
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...458 tation and is also consistent with other studies (Danso-Abbeam et al., 2014)....
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...Danso-Abbeam et al. (2014) studied cocoa farmers’ willingness to pay for farm insurance in the Western region of Ghana using the dichotomous contingent valuation approach. Results from the probit regression revealed that married farmers with a lot of responsibility and educated farmers who are more likely to understand the scheme were willing to participate. Farm size and income, land ownership and farming experience were the determining factors of the willingness to insure. The truncated regression results revealed similar findings on determinants of farmers’ WTP amounts. Nimoh et al. (2011) revealed that most farmers were willing to purchase insurance for protection against uncertainties and to serve as a buffer....
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20 Jun 2019
TL;DR: Based on a field survey of 240 smallholder farmers in the Garut District, West Java Province in August-October 2017 and February 2018, the contingent valuation method (CVM) estimated that farmers' mean willingness to pay (WTP) was Rp 30,358/ha/cropping season ($2.25/hp/hp) which was 16 percent lower than the current premium as mentioned in this paper.
Abstract: To reduce the negative impacts of risks in farming due to climate change, the government implemented agricultural production cost insurance in 2015. Although a huge amount of subsidy has been allocated by the government (80 percent of the premium), farmers’ participation rate is still low (23 percent of the target in 2016). In order to solve the issue, it is indispensable to identify farmers’ willingness to pay (WTP) for and determinants of their participation in agricultural production cost insurance. Based on a field survey of 240 smallholder farmers in the Garut District, West Java Province in August–October 2017 and February 2018, the contingent valuation method (CVM) estimated that farmers’ mean willingness to pay (WTP) was Rp 30,358/ha/cropping season ($2.25/ha/cropping season), which was 16 percent lower than the current premium (Rp 36,000/ha/cropping season = $2.67/ha/cropping season). Farmers who participated in agricultural production cost insurance shared some characteristics: operating larger farmland, more contact with agricultural extension service, lower expected production for the next cropping season, and a downstream area location.
17 citations
Cites background from "Willingness to Pay for Farm Insuran..."
...Di Falco et al. (2014) found that agricultural insurance can decrease variability of revenues from farming and prevent them from falling below a given threshold level....
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References
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TL;DR: This article developed several models for limited dependent variables, which are extensions of the multiple probit analysis model and differ from that model by allowing the determination of the size of the variable when it is not zero to depend on different parameters or variables from those determining the probability of its being zero.
Abstract: THIS PAPER DEVELOPS some models for limited dependent variables.2 The distinguishing feature of these variables is that the range of values which they may assume has a lower bound and that this lowest value occurs in a fair number of observations. This feature should be taken into account in the statistical analysis of observations on such variables. In particular, it renders invalid use of the usual regression model. The second section of this paper develops several models for such variables. Like Tobin's [10] model, they are extensions of the multiple probit analysis model.3 They differ from that model by allowing the determination of the size of the variable when it is not zero to depend on different parameters or variables from those determining the probability of its being zero. Estimation and discrimination in the models are considered in Section 3. The models, like their prototypes, seem particularly intractable to exact analysis and large sample approximations have to be used. The adequacy of inferences based on these procedures is explored in Section 4 through a small sampling experiment. Limited dependent variables arise naturally in the study of consumer purchases, particularly purchases of durable goods. When a durable good is to be purchased, the amount spent may vary in fine gradations, but for many durables it is probably the case that most consumers in a particular period make no purchase at all. In Section 5 we apply the models to the demand for durable goods to provide an application of the techniques.
2,808 citations
"Willingness to Pay for Farm Insuran..." refers background or result in this paper
...This result somehow supports a recent study by Danso-Abbeam (2014) who reported that about 70% of cocoa farmers in Ghana had farm sizes measured between 1 – 5 hectares of cocoa farm lands....
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...Following Cragg (1971), farmer’s decision to adopt insurance policy and the minimum price they are willing to pay can be modeled as; iii uXA 2 / 1 * 1 )1,0(NU i [1] 00,0,1 *1 * 11 ii AifisandAifA Insurance taking decision iii vXA 2 / 2 * 2 ),0( 2NVi [2] 010,01 *21 * 21 * 22 iiiiii…...
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...Following Cragg (1971), farmer’s decision to adopt insurance policy and the minimum price they are willing to pay can be modeled as;...
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TL;DR: In this paper, the authors introduce a special issue on the topic of income diversification and livelihoods in rural Africa: Cause and Consequence of change, where the authors concentrate on core conceptual issues that bedevil the literature on rural income diversity and the policy implications of the empirical evidence presented in this special issue.
1,726 citations
TL;DR: In this article, the authors use panel data on investments in rural India to examine how the composition of productive and nonproductive asset holdings varies across farmers with different levels of total wealth and across farmers facing different degrees of weather risk.
Abstract: Despite the growing evidence that farmers in low-income environments are risk-averse, there has been little empirical evidence on the importance of risk in shaping the actual allocation of production resources among farmers differentiated by wealth. The authors use panel data on investments in rural India to examine how the composition of productive and nonproductive asset holdings varies across farmers with different levels of total wealth and across farmers facing different degrees of weather risk. Income variability is a prominent feature of the experience of rural agents in low-income countries. The authors report evidence, based on measures of rainfall variability, that the agricultural investment portfolio behavior of farmers in such settings reflects risk aversion, due evidently to limitations on consumption-soothing mechanisms such as crop insurance or credit markets. The authors' results suggest that uninsured weather risk is a significant cause of lower efficiency and lower average incomes: a one-standard-deviation decrease in weather risk (measured by the standard deviation of the timing of the rainy season) would raise average profits by up to 35 percent among farmers in the lowest wealth quartile. Moreover, rainfall variability induces a more unequal distribution of average incomes for a given distribution of wealth. Wealthier farmers are willing to absorb significant risk without giving up profits to reduce production risk. Smaller farmers have to invest their limited wealth in ways that reduce their exposure to risk at the cost of lower profit rates. The authors found that at high levels of rainfall variability, differences in rates of profit per unit of agricultural assets were similar across classes of wealth. But over the sample range of rainfall variability, these rates of profit were always higher for the poorer farmers than for the wealthier ones, suggesting that the disadvantages of small farmers in risk diffusion are more than offset by their labor cost advantage.
964 citations
TL;DR: In this paper, the importance of the double-hurdle approach for modelling individuals' cigarette consumption, using data from the UK General Household Survey, and argues that participation and consumption should be treated as separate individual choices.
Abstract: This paper shows the importance of the double-hurdle approach for modelling individuals' cigarette consumption, using data from the UK General Household Survey, and argues that participation and consumption should be treated as separate individual choices. The likelihood function for the full double-hurdle is derived, and it is shown how restrictions on the stochastic specification of the model and auxillary information, which identifies ex-smokers, allow it to be decomposed. The empirical results highlight the value of the sample separation information and the need to model starting and quitting as separate decisions.
456 citations
"Willingness to Pay for Farm Insuran..." refers methods in this paper
...Thus, the log-likelihood functions of the doublehurdle model allows for maximization without loss of information by the separate maximization of the two components, thus; the probit model followed by a truncated regression model on the non-zero observations (Jones, 1989; McDowell, 2003)....
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TL;DR: In this paper, the influence of risk perceptions, competing risk management options, as well as structural and demographic differences on crop insurance usage was evaluated. And the marginal effects of size, age, perceived yield risk, and perceived importance of risk management activities were identified in terms of their influences on choices among alternative crop insurance products.
Abstract: Farmers' decisions to purchase crop insurance and their choices among alternative products are analyzed using a two-stage estimation procedure. The influences of risk perceptions, competing risk management options, as well structural and demographic differences are evaluated. The likelihood for crop insurance usage is found to be higher for larger, older, less tenured, more highly leveraged farms, and by those with higher perceived yield risks. The marginal effects of size, age, perceived yield risk, perceived importance of risk management activities, and other structural and demographic variables are identified in terms of their influences on choices among alternative crop insurance products. Copyright 2004, Oxford University Press.
288 citations