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Does bundling crop insurance with certified seeds crowd-in investments? Experimental evidence from Kenya

Author

Listed:
  • Bulte, Erwin
  • Cecchi, Francesco
  • Lensink, Robert
  • Marr, Ana
  • Van Asseldonk, Marcel

Abstract

We use a randomised experiment in Kenya to analyse how smallholder farmers respond to receiving a free hybrid crop insurance product, conditional on purchasing certified seeds. We find that farmers increase effort—increasing total investments and taking more land in production. In addition to adopting more certified seeds, they also invest more in complementary inputs such as fertilizer and hired-in farm-machinery and non-farm labour. We find limited evidence of a change in farming intensity. For example, there is no evidence of ‘crowding-out’ of effort or inputs on a per-hectare basis, even if the indemnity-based component of the insurance product potentially gives rise to asymmetric information problems (moral hazard). We also document that ex post willingness to pay for the insurance product has increased for the treatment group. This suggests that learning about the benefits of (subsidized) insurance outweighs any anchoring effects on the zero price during the pilot study.

Suggested Citation

  • Bulte, Erwin & Cecchi, Francesco & Lensink, Robert & Marr, Ana & Van Asseldonk, Marcel, 2019. "Does bundling crop insurance with certified seeds crowd-in investments? Experimental evidence from Kenya," Greenwich Papers in Political Economy 23788, University of Greenwich, Greenwich Political Economy Research Centre.
  • Handle: RePEc:gpe:wpaper:23788
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    File URL: http://gala.gre.ac.uk/id/eprint/23788/25/23788%20MARR_Does_Bundling_Crop_Insurance_with_Certified_Seeds_Crowd-in%20Investments_%28OA%29_2019.pdf
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    Cited by:

    1. Chowdhury, Shyamal & Smits, Joeri & Sun, Qigang, 2020. "Contract Structure, Time Preference, and Technology Adoption," IZA Discussion Papers 13590, Institute of Labor Economics (IZA).
    2. Chowdhury, Shyamal & Smits, Joeri & Sun, Qigang, 2020. "Contract structure, time preference, and technology adoption," GLO Discussion Paper Series 633, Global Labor Organization (GLO).

    More about this item

    Keywords

    credit; insurance; agriculture; smallholder farmers;

    JEL classification:

    • Q0 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General

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