Preferences for index-based pasture insurance : a choice experiment in Limpopo Province, South Africa
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Date
Authors
Manganyi, Bernard
Jourdain, Damien
Karuaihe, Selma Tuemumunu
Journal Title
Journal ISSN
Volume Title
Publisher
Routledge
Abstract
South African subsistence livestock farmers rely heavily on traditional mitigation and coping mechanisms to deal with the effects of drought. However, these methods have proven ineffective in managing the full impact of drought. Consequently, policymakers are increasingly interested in promoting Index-based Pasture Insurance (IBPI). This paper aims to assess subsistence livestock farmers’ preferences for IBPI. A simple random sampling method was used to select 110 subsistence livestock farmers for data collection. A discrete choice experiment—Conditional Logit and Latent Class models and incentivized lottery games were used to elicit preferences for insurance contracts and loss aversion. The findings indicate that subsistence livestock farmers have a favourable attitude toward IBPI contracts that protect against drought-related pasture degradation. The Conditional Logit model shows that farmers prefer transparent contracts that reimburse with feed and vouchers rather than cash. However, they derive negative marginal utility from basis risk and premium. However, the Latent Class model reveals heterogeneous preferences for IBPI among farmers. Farmers are also loss-averse, but loss aversion did not influence their preference for IBPI. Therefore, the primary recommendation for insurance providers is to consider customizing IBPI attributes to increase adoption among subsistence farmers.
Description
Keywords
Climate change, Discrete choice experiment, Drought, Index-based pasture insurance, Loss aversion, Risk aversion, Subsistence farmers, SDG-13: Climate action, SDG-02: Zero hunger
Sustainable Development Goals
SDG-02:Zero Hunger
SDG-13:Climate action
SDG-13:Climate action
Citation
Bernard Manganyi, Damien Jourdain & Selma Karuaihe (2024) Preferences
for index-based pasture insurance: a choice experiment in Limpopo Province, South Africa, Agrekon, 63:3, 148-165, DOI: 10.1080/03031853.2024.2387342.