Working Paper: NBER ID: w27564
Authors: Quentin Stoeffler; Michael Carter; Catherine Guirkinger; Wouter Gelade
Abstract: This paper examines whether agricultural insurance can boost investment by small scale farmers in West Africa. We conduct a randomized evaluation to analyze the impacts of index insurance for cotton farmers in Burkina Faso. We find no impact of insurance on cotton, but, consistent with microeconomic theory, we find significant spillover impacts on investment in other agricultural activities. Furthermore, the effects of insurance payouts on farmers hit by a shock confirm the potential of index insurance as a risk-management tool. However, we uncover important flaws in the implementation of the project that limited its impacts. Overall, this study suggests a promising role of index insurance for stimulating investment, but also draws attention to key challenges for an efficient delivery of insurance to small farmers. Finally, the hybrid, mixed methods RCT design that we employ offers lessons for the evaluation of complex interventions where trust, understanding and timing are all important.
Keywords: Index Insurance; Agricultural Investment; Cotton Farmers; Burkina Faso; Risk Management
JEL Codes: G22; I38; O12; O13; Q12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| trust in insurance (G52) | effectiveness of intervention (I24) |
| timing of insurance sales (G52) | effectiveness of intervention (I24) |
| index insurance (G52) | cotton investment (G31) |
| index insurance (G52) | area cultivated (Q15) |
| index insurance (G52) | input use (C67) |
| index insurance (G52) | yields (G12) |
| index insurance (G52) | sesame production (O53) |
| index insurance (G52) | livestock holdings (Q15) |