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Estimating the Demand Factors and Willingness to Pay for Agricultural Insurance

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  • Osman Gulseven

Abstract

This article investigates the effect of prices and socio-demographic variables on the farmers decision to purchase agricultural insurance. A survey has been conducted to 200 farmers most of whom are engaged in diversified income-generating activities. The logistic estimation results suggest that education and household income from farming activities positively affect the likelihood of purchasing insurance. The demand for insurance is negatively correlated with the premium paid per insured value, suggesting that insurance is a normal good. Farmers are willing to pay (WTP) increasingly higher premiums for contracts with a higher coverage ratio. According to the valuation model, the WTP declines sharply for coverage ratios under 70%.

Suggested Citation

  • Osman Gulseven, 2020. "Estimating the Demand Factors and Willingness to Pay for Agricultural Insurance," Papers 2004.11279, arXiv.org.
    • Handle: RePEc:arx:papers:2004.11279
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    References listed on IDEAS

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    1. Elisabetta Strazzera & Riccardo Scarpa & Pinuccia Calia & Guy Garrod & Kenneth Willis, 2003. "Modelling zero values and protest responses in contingent valuation surveys," Applied Economics, Taylor & Francis Journals, vol. 35(2), pages 133-138.
    2. Train,Kenneth E., 2009. "Discrete Choice Methods with Simulation," Cambridge Books, Cambridge University Press, number 9780521766555, October.
    3. McFadden, Daniel, 1980. "Econometric Models for Probabilistic Choice among Products," The Journal of Business, University of Chicago Press, vol. 53(3), pages 13-29, July.
    4. World Bank, 2005. "Managing Agricultural Production Risk : Innovations in Developing Countries," World Bank Publications - Reports 8797, The World Bank Group.
    5. Alain Janvry & Ravi Kanbur (ed.), 2006. "Poverty, Inequality and Development," Economic Studies in Inequality, Social Exclusion, and Well-Being, Springer, number 978-0-387-29748-4, January.
    6. Jesús Antón & Shingo Kimura, 2011. "Risk Management in Agriculture in Spain," OECD Food, Agriculture and Fisheries Papers 43, OECD Publishing.
    7. World Bank, 2005. "Managing Agricultural Production Risk : Innovations in Developing Countries," World Bank Publications - Reports 14434, The World Bank Group.
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    Cited by:

    1. Emmanuella Ellis, 2017. "Willingness to Pay for Index Based Crop Insurance in Ghana," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 7(7), pages 700-721, July.
    2. Codruţa Mare & Daniela Manaţe & Gabriela-Mihaela Mureşan & Simona Laura Dragoş & Cristian Mihai Dragoş & Alexandra-Anca Purcel, 2022. "Machine Learning Models for Predicting Romanian Farmers’ Purchase of Crop Insurance," Mathematics, MDPI, vol. 10(19), pages 1-13, October.
    3. Dadang Jainal Mutaqin & Koichi Usami, 2019. "Smallholder Farmers’ Willingness to Pay for Agricultural Production Cost Insurance in Rural West Java, Indonesia: A Contingent Valuation Method (CVM) Approach," Risks, MDPI, vol. 7(2), pages 1-18, June.

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