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Risk aversion level influence on farmer's decision to participate in crop insurance: A review

Author

Listed:
  • Rizky Yanuarti

    (Department of Agribusiness, Faculty of Agriculture, University of Jember, Jember, Indonesia)

  • Joni Murti Mulyo Aji
  • Mohammad Rondhi

    (Department of Agribusiness, Faculty of Agriculture, University of Jember, Jember, Indonesia)

Abstract

Agricultural insurance in Indonesia is focused specifically on rice farming and is locally known as Asuransi Usahatani Padi (AUTP). To encourage farmer participation, the government subsidises farmers' cost of insurance (premium) by 80%. Despite high subsidy, AUTP is still unable to reach the coverage target. The objectives of this study are to investigate farmers' Risk Aversion Level (RAL), its influence on farmers' decision to participate in AUTP, and the effect of farmers' participation in AUTP on their income. The result of this study can contribute to enriching agriculture insurance literature from the point of view of developing countries and catalyse other studies on this matter especially in Indonesia. The analysis methods used in this study were multiple pricelist designs and propensity score matching with a logistic regression model. 130 farmers were interviewed. The results showed that farmers tend to have a high level of risk aversion (82.3% of farmers insure almost all of their land). RAL has a significant effect on farmers' decision to purchase AUTP (< 0.01). A positive value of Average Treatment on the Treated (ATT) indicated that participation in AUTP has a positive impact on farmers' income. AUTP is able to absorb production risks and encourage use of high input in farming.

Suggested Citation

  • Rizky Yanuarti & Joni Murti Mulyo Aji & Mohammad Rondhi, 2019. "Risk aversion level influence on farmer's decision to participate in crop insurance: A review," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 65(10), pages 481-489.
    • Handle: RePEc:caa:jnlage:v:65:y:2019:i:10:id:93-2019-agricecon
    DOI: 10.17221/93/2019-AGRICECON
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    References listed on IDEAS

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    Cited by:

    1. Jianru Fu & Ruiyuan Shen & Chao Huang, 2023. "How does price insurance alleviate the fluctuation of agricultural product market? A dynamic analysis based on cobweb model," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 69(5), pages 202-211.
    2. Shiqi Guan & Menglin Zhao & Feng Han & Zeng Tang, 2024. "The Impact of Herders’ Risk Attitudes on Livestock Insurance: Evidence from the Pastoral Areas of Tibetan Plateau," Agriculture, MDPI, vol. 14(7), pages 1-18, June.

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