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Liquidity constraints, risk preferences and farmers’ willingness to participate in crop insurance programs in Ghana

Author

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

Abstract

This paper analyzes smallholder farmers’ decisions to participate in crop insurance programs, using cross-sectional data from cocoa farmers in the Ashanti, Brong-Ahafo and Western Regions of Ghana. Given the significance of output uncertainty and imperfect capital and insurance markets, we develop a theoretical framework to show how risk preferences and liquidity constraints influence farmers’ crop insurance participation decisions. We use a 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 and liquidity constraints influence farmers’ willingness to participate in crop insurance programs. The results also show that the probability of participating in crop insurance programs is higher for males, the more educated, and those who trust others. The levels of fertilizer and pesticide expenditure and the access to credit are also found to significantly influence the decision to adopt the programs.

Suggested Citation

  • Abdulai, Awudu & Goetz, Renan & Ali, Williams & Owusu, Victor, 2018. "Liquidity constraints, risk preferences and farmers’ willingness to participate in crop insurance programs in Ghana," 2019 Allied Social Sciences Association (ASSA) Annual Meeting, January 4-6, 2019, Atlanta, Georgia 281162, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:assa19:281162
    DOI: 10.22004/ag.econ.281162
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    Keywords

    Crop Production/Industries; Risk and Uncertainty;

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