New modalities for managing drought risk in rainfed agriculture: Evidence from a discrete choice experiment in Odisha, India. (July 2018)

• Record Type: Journal Article
• Authors: Ward, Patrick S.; Makhija, Simrin
• Is Part Of: World development. Volume 107(2018)
• Page Start: 163
• Page End: 175
• Publication Date: 2018-07
• Subjects: Drought risk -- Insurance -- Drought tolerant varieties -- India; Economic history -- 1990- -- Periodicals; Economic assistance -- Developing countries -- Periodicals; 330.9
• DOI: 10.1016/j.worlddev.2018.03.002
• Languages: English
• ISSNs: 0305-750X

Abstract

Highlights: This study considers drought tolerant rice and weather index insurance. We use discrete choice experiments in Odisha, India. We estimate the added value that farmers perceive in the bundled product above. We show that valuations are very sensitive to the basis risk implied by the insurance product. Farmers less enthusiastic about risk management products that leave significant risks uninsured. Abstract: Droughts have historically had large impacts on agricultural production in rainfed agricultural systems. Scientists and policymakers 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 very sensitive to the basis risk implied by the insurance product, with farmers less enthusiastic about risk management products that leave significant risks uninsured.