Journal
WORLD BANK ECONOMIC REVIEW
Volume 36, Issue 1, Pages 114-140Publisher
OXFORD UNIV PRESS
DOI: 10.1093/wber/lhab011
Keywords
index insurance; Burkina Faso; productive investments; randomized evaluation; mixed-methods
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This study found that index insurance did not impact cotton yields but had significant effects on investment in other agricultural activities, as well as confirming the incentive effects of insurance payouts on farmers. However, there were important flaws in the project implementation that limited its impact on cotton yields.
This paper examines whether agricultural insurance can boost investment by small scale farmers in West Africa. It is based on a randomized evaluation designed to analyze the impacts of index insurance for cotton farmers in Burkina Faso. No impact of insurance was found on cotton, but, consistent with microeconomic theory, significant spillover impacts on investment in other agricultural activities were measured. Furthermore, the effects of insurance payouts on farmers hit by a shock confirm the potential of index insurance as a risk-management tool. However, this research uncovers important flaws in the implementation of the project that limited its impact on cotton. Overall, this study suggests a promising role for index insurance in stimulating investment, but also draws attention to key challenges to the efficient delivery of insurance to small farmers. Finally, the study's hybrid, mixed methods RCT offers lessons for the evaluation of complex interventions where trust, understanding, and timing are all important.
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