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Farm households' preference for cash-based compensation versus livelihood-enhancing programs: A choice experiment to inform avian flu compensation policy in Nigeria

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  • Oparinde, Adewale
  • Birol, Ekin

Abstract

In this paper we attempt to bridge the resilience school of thought and incentive compatibility in livestock disease control policies through a pilot choice experiment study conducted on 104 farm households in the Nasarawa state of Nigeria. The aim of this study was to shed light on farm households' valuation of various compensation plan attributes and trade-offs among these attributes. In the experiment presented here, compensation plan was defined broadly to include not just the traditional attributes, such as the number of days it takes to receive the payment, the compensation rate, and the method of payment, but also more diverse interventions, such as training in biosecurity measures and access to bank loans, which are expected to have longer-term impacts on households' livelihood outcomes. We analyzed the data using various discrete choice models, the best-fitting of which was the random parameter (or mixed) logit model with interactions, which enabled us to capture both unobserved and observed heterogeneity in farm households' preferences for the compensation plan attributes. The results reveal that overall, study households preferred compensation plans that made payment in fewer days, provided facilitated credit access, and offered biosecurity training. Households with better-educated heads and those with lower income levels valued compensation plans that provided credit access and biosecurity training the most. These findings are expected to inform the design of efficient, effective, equitable, and targeted compensation policies, which could not only reduce the livestock disease risk but also improve the resilience of poor farm households' livelihoods against future poultry-related or other idiosyncratic shocks.

Suggested Citation

  • Oparinde, Adewale & Birol, Ekin, 2011. "Farm households' preference for cash-based compensation versus livelihood-enhancing programs: A choice experiment to inform avian flu compensation policy in Nigeria," IFPRI discussion papers 1072, International Food Policy Research Institute (IFPRI).
  • Handle: RePEc:fpr:ifprid:1072
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    References listed on IDEAS

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    1. Frank Ellis, 2000. "The Determinants of Rural Livelihood Diversification in Developing Countries," Journal of Agricultural Economics, Wiley Blackwell, vol. 51(2), pages 289-302.
    2. Hausman, Jerry & McFadden, Daniel, 1984. "Specification Tests for the Multinomial Logit Model," Econometrica, Econometric Society, vol. 52(5), pages 1219-1240, September.
    3. Birol, Ekin & Asare-Marfo, Dorene & Ayele, Gezahegn & Mensa-Bonsu, Akwasi & Ndirangu, Lydia & Okpukpara, Benjamin & Roy, Devesh & Yakhshilikov, Yorbol, 2010. "Investigating the role of poultry in livelihoods and the impact of avian flu on livelihoods outcomes in Africa," IFPRI discussion papers 1011, International Food Policy Research Institute (IFPRI).
    4. Frank Ellis, 1998. "Household strategies and rural livelihood diversification," Journal of Development Studies, Taylor & Francis Journals, vol. 35(1), pages 1-38.
    5. Peter Boxall & Wiktor Adamowicz, 2002. "Understanding Heterogeneous Preferences in Random Utility Models: A Latent Class Approach," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 23(4), pages 421-446, December.
    6. Wuyang Hu, 2004. "Trading off health, environmental and genetic modification attributes in food," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 31(3), pages 389-408, September.
    7. Kelvin J. Lancaster, 1966. "A New Approach to Consumer Theory," Journal of Political Economy, University of Chicago Press, vol. 74, pages 132-132.
    8. Gramig, Benjamin M. & Horan, Richard D. & Wolf, Christopher A., 2005. "A Model of Incentive Compatibility under Moral Hazard in Livestock Disease Outbreak Response," 2005 Annual meeting, July 24-27, Providence, RI 19200, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
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    Keywords

    avian flu; choice experiment method; compensation scheme; conditional logit model; livestock disease; random parameter logit model;

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