Examining Underinvestment in Agriculture in Ghana

Ceren Baysan
Chris Udry
Start Date: 
September, 2011

Researchers are investigating the role of risk in constraining farmer investment and technology adoption choices, and to evaluate its importance relative to constraints on credit. The 1,200 farmers in Ghana were randomly allocated to be offered one of the following products: (1) a capital grant; (2) a rainfall insurance product for free; (3) a rainfall insurance product at various prices - ranging from highly subsidized to the commercial price; or (4) both rainfall insurance and capital. A further group of randomly-selected farmers received no offers, serving as the comparison group.

The capital grant was provided to selected farmers to coincide with each individual farmer’s requirements for purchasing inputs, and the innovative rainfall insurance policy aimed at providing some protection from drought or excess rain during the height of the farming season and was designed to be as simple as possible. Data was collected on a range of variables relating to households’ economic activities and well-being, including farming activities and production and households’ use of insurance, savings and credit facilities (both formal and informal). Surveys also include farm measurement and soil sample, and the evaluation design allows researchers to examine the impact of social mechanisms in building trust in and the understanding of a new financial product. We would like to examine other types of data, such as NDVI to help improve the rainfall indexed insurance project.