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Risk, ambiguity and willingness to participate in crop insurance programs: Evidence from a field experiment

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  • Williams Ali
  • Awudu Abdulai
  • Renan Goetz
  • Victor Owusu

Abstract

This paper analyses smallholder farmers’ willingness to participate in crop insurance programs, using recent data from cocoa farmers in Ghana. Given the significance of output uncertainty and imperfect capital and insurance markets, we develop a theoretical framework to analyse how risk and ambiguity aversion, and liquidity constraints influence farmers’ crop insurance participation decisions. We employ field experiments to elicit farmers’ ambiguity and risk aversion, the stated preference approach to obtain information on farmers’ willingness to participate in crop insurance programs, and a discrete choice model to examine the factors that influence their participation decisions. We find that risk preferences, ambiguity aversion, and liquidity constraints influence farmers’ willingness to participate in crop insurance programs. The results also reveal that the probability of participating in crop insurance programs is positively influenced by wealth, trust and education of the farmers.

Suggested Citation

  • Williams Ali & Awudu Abdulai & Renan Goetz & Victor Owusu, 2021. "Risk, ambiguity and willingness to participate in crop insurance programs: Evidence from a field experiment," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 65(3), pages 679-703, July.
    • Handle: RePEc:bla:ajarec:v:65:y:2021:i:3:p:679-703
    DOI: 10.1111/1467-8489.12434
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    4. Ambali, Omotuyole I. & Areal, Francisco J. & Georgantzis, Nikolaos & Oyetunde-Usman, Zainab, 2021. "Examining the Role of Spatially-Dependent Time Preference in Improved Rice Technology Adoption Decisions," 2021 Conference, August 17-31, 2021, Virtual 315286, International Association of Agricultural Economists.
    5. Serge Blondel & Ngoc-Thao Noet, 2023. "Quels facteurs expliquent la faible coopération en horticulture ?," TEPP Research Report 2023-01, TEPP.
    6. Joshua Munkombwe & Jackson Phiri & Enock Siankwilimba, 2022. "Financial Innovation among Smallholder Farmers: Enhancing the uptake of Weather Index Insurance through a Pragmatic Approach," Journal of Social Sciences Advancement, Science Impact Publishers, vol. 3(1), pages 01-19.

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