Date of Award
Bachelor of Arts
I investigate the potential welfare gains of rain-index insurance by creating a model for the risk aversion of Ethiopian farmers by using food security as a measure of the utility from income. I find, with a high level of significance, that the utility curve of Ethiopian farmers‰Ûª is concave and is consistent with risk adverse preferences. Using the estimated coefficients, I predict the willingness to pay for insurance and find that it is substantial ... Despite substantial demand, many farmers remain uninsured. This fact may be a product of the costs associated with running an insurance program or with insufficient market infrastructure. However, my results provide strong evidence in favor of expanding rain-index insurance. I will first outline the structure of rain-index insurance, providing an overview of the insurance contract followed by details specific to Ethiopia. Second, I explore the advantages, pitfalls, and potential solutions associated with informal insurance and formal rain-index insurance through a review of the literature. And finally, I describe my empirical study.
West, Marika, "Crop Insurance in Emerging Markets: Predicting Risk Aversion in Ethiopian Farmers" (2012). Honors Theses. 56.