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New modalities for managing drought risk in rainfed agriculture: Evidence from a discrete choice experiment in Odisha, India:

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  • Ward, Patrick S.
  • Makhija, Simrin

Abstract

In this paper we explore the potential for a new approach to managing drought risk among rainfed rice producers in Odisha, India. Droughts have historically been a serious constraint to agricultural production in rainfed agricultural systems, with droughts resulting in significant reductions in both yields and cultivated area, in turn leading to significant impacts on rural livelihoods and food security. Scientists and policy makers have proposed various strategies for managing risks, with limited success. In this study we consider two such strategies, specifically drought-tolerant rice and weather index insurance. While neither drought-tolerant cultivars nor weather index insurance products are perfect solutions for adequately managing drought risk in and of themselves, there is scope to exploit the benefits of each and bundle them into a complementary risk management product, specifically through proper index calibration and an optimized insurance design. In this study, we explore preferences for such a complementary risk management product using discrete choice experiments in Odisha, India. We are able to estimate the added value that farmers perceive in the bundled product above and beyond the value associated with each of the independent products. We also show that valuations are sensitive to the basis risk implied by the insurance product, with farmers less enthusiastic about risk management products that leave significant risks uninsured.

Suggested Citation

  • Ward, Patrick S. & Makhija, Simrin, 2016. "New modalities for managing drought risk in rainfed agriculture: Evidence from a discrete choice experiment in Odisha, India:," IFPRI discussion papers 1563, International Food Policy Research Institute (IFPRI).
  • Handle: RePEc:fpr:ifprid:1563
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    References listed on IDEAS

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    Cited by:

    1. Elliott R. Dossou-Yovo & Sander J. Zwart & Amadou Kouyaté & Ibrahima Ouédraogo & Oladele Bakare, 2018. "Predictors of Drought in Inland Valley Landscapes and Enabling Factors for Rice Farmers’ Mitigation Measures in the Sudan-Sahel Zone," Sustainability, MDPI, Open Access Journal, vol. 11(1), pages 1-17, December.
    2. Dossou-Yovo, E. R. & Zwart, Sander J. & Kouyate, A. & Ouedraogo, I. & Bakare, O., 2019. "Predictors of drought in inland valley landscapes and enabling factors for rice farmers’ mitigation measures in the Sudan-Sahel Zone," Papers published in Journals (Open Access), International Water Management Institute, pages 11(1):1-17..
    3. Hansen, James & Hellin, Jon & Rosenstock, Todd & Fisher, Eleanor & Cairns, Jill & Stirling, Clare & Lamanna, Christine & van Etten, Jacob & Rose, Alison & Campbell, Bruce, 2019. "Climate risk management and rural poverty reduction," Agricultural Systems, Elsevier, vol. 172(C), pages 28-46.
    4. Hill, Ruth Vargas & Kumar, Neha & Magnan, Nicholas & Makhija, Simrin & de Nicola, Francesca & Spielman, David J. & Ward, Patrick S., 2017. "Insuring against droughts: Evidence on agricultural intensification and index insurance demand from a randomized evaluation in rural Bangladesh," IFPRI discussion papers 1630, International Food Policy Research Institute (IFPRI).
    5. Hill, Ruth Vargas & Kumar, Neha & Magnan, Nicholas & Makhija, Simrin & de Nicola, Francesca & Spielman, David J. & Ward, Patrick S., 2019. "Ex ante and ex post effects of hybrid index insurance in Bangladesh," Journal of Development Economics, Elsevier, vol. 136(C), pages 1-17.
    6. Ortega, David L. & Ward, Patrick S. & Caputo, Vincenzina, 2019. "Evaluating producer preferences and information processing strategies for drought risk management tools in Bangladesh," World Development Perspectives, Elsevier, vol. 15(C), pages 1-1.

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    Keywords

    drought; risk; drought tolerance; rice; insurance; rainfed farming; agricultural policies;
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