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Weather insurance for Ethiopian farmers

The cost effectiveness of integrating weather index agricultural insurance into the Productive Safety Net Programme in Ethiopia

This project extends research on weather index insurance (WII) by investigating whether or not it can be a form of social protection and integrated cost effectively into existing national social safety net interventions. The study will be conducted in the Tigray region of Northern Ethiopia. The interest in WII is because rainfall shocks such as drought adversely affect households and policy actors are considering WII as a potential intervention to mitigate the adverse effects. To reduce poverty and attain development objectives, the government of Ethiopia initiated the Productive Safety Net Programme (PSNP) in 2005. PSNP is a food and cash transfer programme for the rural poor, which the government and other agencies are seeking to expand and improve. One way of achieving this is to include a WII component in the programme, but there is little evidence as to the effects and cost effectiveness of integrating WII into the PSNP. This study, therefore, examines if WII can be introduced as a new form of social protection and integrated cost effectively into the existing national safety net.

The research questions are:

  1. How can a fixed amount of the social protection budget be best allocated to the expansion of national safety net programmes? Should the government raise the amount of conditional cash transfers (CCT) or provide households with weather index insurance as a new form of social protection?
  2. What are the likely effects of the provision of weather index insurance on poor households? How do these effects compare with the effects of providing additional CCTs?
  3. Could weather index insurance complement the existing social safety net programme? Would the effects of weather index insurance be greater on agricultural production and investments and the effects of CCTs greater on current account consumption? What about long-term human capital investment?

This study employs a randomized controlled trial (RCT) methodology and aims to construct panel data for 900 rural households in Ethiopia consisting of three waves of data collection over a two-year period. The aim is to compare the effects and cost effectiveness of three different social protection scenarios among poor rural households in Ethiopia: pure PSNP, PSNP and WII, and PSNP and CCT. Baseline, midline and endline surveys will be conducted. Additional data will be gathered through surveys with village and township leaders. The impacts of the interventions will be evaluated in terms of different social and economic outcomes in both the short- and medium-terms through econometric analysis of the panel dataset constructed.

The study will provide evidence of the outcomes of agricultural weather index insurance as an additional component of the safety net programme, which policy-makers can then draw on when formulating social protection interventions. This is particularly important in the context of ongoing efforts to expand and improve the PSNP. Knowledge activities will include workshops and panel discussions with diverse policy actors. Further dissemination of the research findings will be done through the print media, journal publications, policy briefs and conference proceedings.

 


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Organisations

  • Columbia University
  • Lingnan University
  • Mekelle University
  • Nyala Insurance Share Company
  • Relief Society of Tigray
  • Wageningen University and Research Centre


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