Demand for Complementary Financial and Technological Tools for Managing Drought Risk

Financial and technological innovations that mitigate weather-related production risks have the potential to greatly benefit farmers in many risk-prone areas. In this study we examine farmers’ preferences for two distinct tools that allow them to manage drought risk: weather index insurance and a recently released drought-tolerant rice variety. We illustrate how these tools can independently address drought risk and demonstrate the additional benefits gained by combining them into a complementary risk management product. Findings indicate that farmers are generally unwilling to adopt the drought-tolerant variety independent of insurance, largely due to a yield penalty under non-drought conditions. When bundled with insurance, however, farmers’ valuation of the variety increases. Farmers value insurance on its own, but even more so when bundled with the drought-tolerant variety. The results provide evidence that farmers value the complementarities inherent in a well-calibrated bundle of risk management tools.


Variant title:
Demand for Complementary Financial and Technological Tools for Managing Drought Risk
Issue Date:
2015
Publication Type:
Conference Paper/ Presentation
Record Identifier:
http://ageconsearch.umn.edu/record/211909
PURL Identifier:
http://purl.umn.edu/211909
Total Pages:
39




 Record created 2017-04-01, last modified 2018-01-23

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