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Does bundling crop insurance with certified seeds crowd-in investments? Experimental evidence from Kenya

Does bundling crop insurance with certified seeds crowd-in investments? Experimental evidence from Kenya

Bulte, Erwin, Cecchi, Francesco, Lensink, Robert, Marr, Ana and Van Asseldonk, Marcel (2019) Does bundling crop insurance with certified seeds crowd-in investments? Experimental evidence from Kenya. Journal of Economic Behavior and Organization. ISSN 0167-2681 (In Press) (doi:https://doi.org/10.1016/j.jebo.2019.07.006)

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Abstract

We use a randomised experiment in Kenya to analyse how smallholder farmers respond to receiving a free hybrid crop insurance product, conditional on purchasing certified seeds. We find that farmers increase effort—increasing total investments and taking more land in production. In addition to adopting more certified seeds, they also invest more in complementary inputs such as fertilizer and hired-in farm-machinery and non-farm labour. We find limited evidence of a change in farming intensity. For example, there is no evidence of ‘crowding-out’ of effort or inputs on a per-hectare basis, even if the indemnity-based component of the insurance product potentially gives rise to asymmetric information problems (moral hazard). We also document that ex post willingness to pay for the insurance product has increased for the treatment group. This suggests that learning about the benefits of (subsidized) insurance outweighs any anchoring effects on the zero price during the pilot study.

Item Type: Article
Uncontrolled Keywords: credit, insurance, agriculture, smallholder farmers
Subjects: H Social Sciences > HB Economic Theory
Faculty / Department / Research Group: Faculty of Business
Faculty of Business > Department of International Business & Economics
Faculty of Business > Institute of Political Economy, Governance, Finance and Accountability (IPEGFA)
Faculty of Business > Institute of Political Economy, Governance, Finance and Accountability (IPEGFA) > Centre for Governance, Risk & Accountability (CGRA)
Faculty of Business > Institute of Political Economy, Governance, Finance and Accountability (IPEGFA) > Greenwich Political Economy Research Centre (GPERC)
Faculty of Engineering & Science
Faculty of Engineering & Science > Natural Resources Institute
Faculty of Engineering & Science > Natural Resources Institute > Food & Markets Department
Last Modified: 25 Oct 2019 13:21
Selected for GREAT 2016: None
Selected for GREAT 2017: None
Selected for GREAT 2018: None
Selected for GREAT 2019: GREAT 1
URI: http://gala.gre.ac.uk/id/eprint/23788

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