Journal
AUSTRALIAN JOURNAL OF AGRICULTURAL AND RESOURCE ECONOMICS
Volume 64, Issue 2, Pages 421-454Publisher
WILEY
DOI: 10.1111/1467-8489.12342
Keywords
agriculture; drought tolerance; index insurance; India; risk and uncertainty
Categories
Funding
- Bill and Melinda Gates Foundation
- United States Agency for International Development (USAID) through the Cereal Systems Initiative for South Asia (CSISA)
- CGIAR Collaborative Research Program on Policies, Institutions, and Markets (PIM)
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In rainfed production systems throughout India, agricultural activities are dependent upon the summer monsoon, and any aberration in monsoon rainfall patterns can have severe consequences for rice production. There is considerable policy interest in designing programs to lower small-scale farmers' exposure to these types of risk given the regularity with which adverse monsoon events occur. This paper introduces a field experiment conducted with two risk management options in the state of Odisha: a drought-tolerant rice cultivar; and a weather index insurance product designed to complement the performance of the cultivar. Uptake rates for the cultivar itself and for the joint product are compared across two years alongside an analysis of factors that predict uptake. Results indicate high levels of demand for both the products, albeit with a significant degree of price sensitivity. But this sensitivity is agnostic to the nature of price reductions, suggesting that public investments that lower the costs of risk management may be sufficient to encourage broad uptake, without necessarily relying upon distortionary subsidies as is so often done. Sustained demand between years one and two is primarily explained where individuals were indemnified in year one and had a large number of peers also purchasing the product.
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