IDEAS home Printed from https://ideas.repec.org/a/caa/jnlage/v65y2019i10id93-2019-agricecon.html
   My bibliography  Save this article

Risk aversion level influence on farmer's decision to participate in crop insurance: A review

Author

Listed:
  • Rizky Yanuarti

    (Department of Agribusiness, Faculty of Agriculture, University of Jember, Jember, Indonesia)

  • Joni Murti Mulyo Aji
  • Mohammad Rondhi

    (Department of Agribusiness, Faculty of Agriculture, University of Jember, Jember, Indonesia)

Abstract

Agricultural insurance in Indonesia is focused specifically on rice farming and is locally known as Asuransi Usahatani Padi (AUTP). To encourage farmer participation, the government subsidises farmers' cost of insurance (premium) by 80%. Despite high subsidy, AUTP is still unable to reach the coverage target. The objectives of this study are to investigate farmers' Risk Aversion Level (RAL), its influence on farmers' decision to participate in AUTP, and the effect of farmers' participation in AUTP on their income. The result of this study can contribute to enriching agriculture insurance literature from the point of view of developing countries and catalyse other studies on this matter especially in Indonesia. The analysis methods used in this study were multiple pricelist designs and propensity score matching with a logistic regression model. 130 farmers were interviewed. The results showed that farmers tend to have a high level of risk aversion (82.3% of farmers insure almost all of their land). RAL has a significant effect on farmers' decision to purchase AUTP (< 0.01). A positive value of Average Treatment on the Treated (ATT) indicated that participation in AUTP has a positive impact on farmers' income. AUTP is able to absorb production risks and encourage use of high input in farming.

Suggested Citation

  • Rizky Yanuarti & Joni Murti Mulyo Aji & Mohammad Rondhi, 2019. "Risk aversion level influence on farmer's decision to participate in crop insurance: A review," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 65(10), pages 481-489.
    • Handle: RePEc:caa:jnlage:v:65:y:2019:i:10:id:93-2019-agricecon
    DOI: 10.17221/93/2019-AGRICECON
    as

    Download full text from publisher

    File URL: http://agricecon.agriculturejournals.cz/doi/10.17221/93/2019-AGRICECON.html
    Download Restriction: free of charge
    File URL: http://agricecon.agriculturejournals.cz/doi/10.17221/93/2019-AGRICECON.pdf
    Download Restriction: free of charge
    File URL: https://libkey.io/10.17221/93/2019-AGRICECON?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Hans P. Binswanger, 1980. "Attitudes Toward Risk: Experimental Measurement in Rural India," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 62(3), pages 395-407.
    2. Marco Caliendo & Sabine Kopeinig, 2008. "Some Practical Guidance For The Implementation Of Propensity Score Matching," Journal of Economic Surveys, Wiley Blackwell, vol. 22(1), pages 31-72, February.
    3. Kaiyu Lyu & Thomas J. Barré, 2017. "Risk aversion in crop insurance program purchase decisions," China Agricultural Economic Review, Emerald Group Publishing Limited, vol. 9(1), pages 62-80, February.
    4. Dan Pan, 2014. "The Impact of Agricultural Extension on Farmer Nutrient Management Behavior in Chinese Rice Production: A Household-Level Analysis," Sustainability, MDPI, vol. 6(10), pages 1-22, September.
    5. Sascha O. Becker & Andrea Ichino, 2002. "Estimation of average treatment effects based on propensity scores," Stata Journal, StataCorp LP, vol. 2(4), pages 358-377, November.
    6. Varadan, R. Jayakumara & Kumar, Pramod, 2012. "Impact of Crop Insurance on Rice Farming in Tamil Nadu," Agricultural Economics Research Review, Agricultural Economics Research Association (India), vol. 25(2).
    7. Rafia Afroz & Rulia Akhtar & Puteri Farhana, 2017. "Willingness to Pay for Crop Insurance to Adapt Flood Risk by Malaysian Farmers: An Empirical Investigation of Kedah," International Journal of Economics and Financial Issues, Econjournals, vol. 7(4), pages 1-9.
    8. Keith H. Coble & Thomas O. Knight & Rulon D. Pope & Jeffery R. Williams, 1997. "An Expected-Indemnity Approach to the Measurement of Moral Hazard in Crop Insurance," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(1), pages 216-226.
    9. Yuan feng Zhao & Zhihui Chai & Michael S Delgado & Paul V Preckel, 2016. "An empirical analysis of the effect of crop insurance on farmers’ income: results from Inner Mongolia in China," China Agricultural Economic Review, Emerald Group Publishing, vol. 8(2), pages 299-313, May.
    10. Barbara Sianesi, 2002. "An evaluation of the Swedish system of active labour market programmes in the 1990s," IFS Working Papers W02/01, Institute for Fiscal Studies.
    11. Yuan feng Zhao & Zhihui Chai & Michael S Delgado & Paul V Preckel & Xian Xin & Xiuqing Wang, 2016. "An empirical analysis of the effect of crop insurance on farmers’ income: results from Inner Mongolia in China," China Agricultural Economic Review, Emerald Group Publishing Limited, vol. 8(2), pages 1-1, March.
    12. Kaiyu Lyu & Thomas J. Barré, 2017. "Risk aversion in crop insurance program purchase decisions," China Agricultural Economic Review, Emerald Group Publishing Limited, vol. 9(1), pages 62-80, February.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jianru Fu & Ruiyuan Shen & Chao Huang, 2023. "How does price insurance alleviate the fluctuation of agricultural product market? A dynamic analysis based on cobweb model," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 69(5), pages 202-211.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ashimwe, Olive, 2016. "An Economic Analysis Of Impact Of Weather Index-Based Crop Insurance On Household Income In Huye District Of Rwanda," Research Theses 265675, Collaborative Masters Program in Agricultural and Applied Economics.
    2. Ashimwe, Olive, 2016. "An Economic Analysis Of Impact Of Weather Index-Based Crop Insurance On Household Income In Huye District Of Rwanda," Research Theses 276460, Collaborative Masters Program in Agricultural and Applied Economics.
    3. Paolo Naticchioni & Silvia Loriga, 2011. "Short and Long Term Evaluations of Public Employment Services in Italy," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot, Berlin, vol. 57(3), pages 201-229.
    4. R. Antonietti & D. Antonioli, 2007. "Conditional Leptokurtosis in Energy Prices: Multivariate Evidence from Futures Markets," Working Papers 594, Dipartimento Scienze Economiche, Universita' di Bologna.
    5. Arnstein Aassve & Maria A. Davia & Maria Iacovou & Stefano Mazzuco, 2007. "Does Leaving Home Make You Poor? Evidence from 13 European Countries," European Journal of Population, Springer;European Association for Population Studies, vol. 23(3), pages 315-338, October.
    6. Richard KOENIG & Marielle BRUNETTE, 2023. "Subjective barriers and determinants to crop insurance adoption," Working Papers of BETA 2023-25, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    7. Jekaterina Dmitrijeva, 2008. "Does Unemployed Training Increase Individual Employability? Evidence from Latvian Microdata," Documents de recherche 08-04, Centre d'Études des Politiques Économiques (EPEE), Université d'Evry Val d'Essonne.
    8. Andrea Pufahl & Christoph R. Weiss, 2009. "Evaluating the effects of farm programmes: results from propensity score matching," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 36(1), pages 79-101, March.
    9. Dettmann, E. & Becker, C. & Schmeißer, C., 2011. "Distance functions for matching in small samples," Computational Statistics & Data Analysis, Elsevier, vol. 55(5), pages 1942-1960, May.
    10. Bemile, Esther & Anders, Sven M., 2014. "Linking Diet-Health Behaviour and Obesity using Propensity Score Matching," 2014 International Congress, August 26-29, 2014, Ljubljana, Slovenia 182832, European Association of Agricultural Economists.
    11. Federico Biagi & Daniele Bondonio & Alberto Martini, 2015. "Counterfactual Impact Evaluation of Enterprise Support Programmes. Evidence from a Decade of Subsidies to Italian Firm," ERSA conference papers ersa15p1619, European Regional Science Association.
    12. Asad K. Ghalib & Issam Malki & Katsushi S. Imai, 2012. "Microfinance and its role in household poverty reduction: findings from Pakistan," Global Development Institute Working Paper Series 17312, GDI, The University of Manchester.
    13. Sascha O. Becker & Marco Caliendo, 2007. "Sensitivity analysis for average treatment effects," Stata Journal, StataCorp LP, vol. 7(1), pages 71-83, February.
    14. Xi, Guoqian & Block, Jörn & Lasch, Frank & Robert, Frank & Thurik, Roy, 2017. "How Does Firm Survival Differ between Business Takeovers and New Venture Start-ups?," IZA Discussion Papers 11155, Institute of Labor Economics (IZA).
    15. Ramírez-Álvarez, Aurora Alejandra, 2019. "Land titling and its effect on the allocation of public goods: Evidence from Mexico," World Development, Elsevier, vol. 124(C), pages 1-1.
    16. Mario A. Maggioni & Domenico Rossignoli & Simona Beretta & Sara Balestri, 2017. "Trust behind bars: a longitudinal study of inmates? prosocial preferences," DISEIS - Quaderni del Dipartimento di Economia internazionale, delle istituzioni e dello sviluppo dis1701, Università Cattolica del Sacro Cuore, Dipartimento di Economia internazionale, delle istituzioni e dello sviluppo (DISEIS).
    17. Ghisetti, Claudia, 2017. "Demand-pull and environmental innovations: Estimating the effects of innovative public procurement," Technological Forecasting and Social Change, Elsevier, vol. 125(C), pages 178-187.
    18. Christian Volpe Martincus & Jerónimo Carballo, 2010. "Is Export Promotion Effective in Developing Countries? Firm-Level Evidence on the Intensive and Extensive Margins of Exports," IDB Publications (Working Papers) 36763, Inter-American Development Bank.
    19. Freudenreich, Hanna & Musshoff, Oliver & Wiercinski, Ben, 2017. "The Relationship between Farmers' Shock Experiences and their Uncertainty Preferences - Experimental Evidence from Mexico," GlobalFood Discussion Papers 256212, Georg-August-Universitaet Goettingen, GlobalFood, Department of Agricultural Economics and Rural Development.
    20. Costa, Lorena Vieira & Helfand, Steven M. & Souza, André Portela, 2018. "No impact of rural development policies?: no synergies with conditional cash transfers?: an investigation of the IFAD-Supported Gavião Project in Brazil," Textos para discussão 489, FGV EESP - Escola de Economia de São Paulo, Fundação Getulio Vargas (Brazil).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:caa:jnlage:v:65:y:2019:i:10:id:93-2019-agricecon. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ivo Andrle (email available below). General contact details of provider: https://www.cazv.cz/en/home/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.