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Impact of Knowledge on Purchasing Weather Index Insurance in Major Drought Prone Areas: case Of Adi Ha Tabia, Tigray, Northern Ethiopia

Abstract: 

Climate variability and weather-related risks are major problems in the world of agriculture. Although agriculture is a weather-based industry, rain-fed agriculture is more vulnerable to weather which implies the risk aversing mechanism needs to be on the basis of nature and character of households. Hence, an appropriate coping mechanism is needed to manage these risks. Weather index insurance (WII) is one important means in mitigating the drought risk. This study aims to determine the impact of knowledge on demand for WII in an attempt to solve problems related to drought risk. The study was conducted in Adi Ha Tabia of Kola Temben Woreda. Data was collected on 120 household heads, 60 households were interviewed from each of purchasers and non-purchasers of insurance. To select the sample respondents a three-stage random sampling technique was employed. Data collected has been analyzed using both, descriptive and econometric techniques. For the econometric analysis, this study employed Heckman Probit model to analyze the two-step process of demand for WII, which initially requires farmer knowledge that WII is important and then responding to demand through knowledge. Results of the descriptive statistics revealed that 84.29% of participant and 2% of non-participant of educational session given about WII are found to be purchasers of insurance while 15.71% of participant and 98% of non-participant found to be non-purchasers. In the selection model, the variables that are found to determine participation in educational session are age of the household head, participation in productive safety net program and perception of household about wealth status. After the selectivity bias is controlled by the model, the demand for WII are affected by gender, age, number of dependents, and knowledge about WII. The study concluded that having access to knowledge participation about WII had positive impact on scaling out the program, increasing the demand for WII in the study area.

Corporate Author: 
Demirew Getachew; Getenet Alemu; Worku Gebeyehu (Editors) and Ethiopian Economic Association
Publisher: 
Ethiopian Economic Association (EEA)
ISBN/ISSN: 
978-99944-54-32-7
Primary Descriptors: 

 Weather Index Insurance

Secondary Descriptor: 

Heckman Probit Selection Model

Geographic Descriptors: 
Northern Ethiopia
Cataloge Date: 
10/11/2013
Broad Subject heading: 
Climate variability
Call Number: 
330.963 PRO 2013
Serial Key Title: 
Proceeding of the Tenth International Conference on the Ethiopian EconomyEconomy
Publication catagory: 
Content type: 
Volume: 
II
Publication date: 
2013-06-03 00:00:00
Conference Place: 
EEA Multi-Purpose Building Conference Hall, Addis Ababa
Place of publication: 
Addis Ababa, Ethiopia
Type of material: 
Book
Current frequency: 
Annually
Conference date: 
July 19 - 21, 2012