Farmers´ preferences for reductions in flood risk under monetary and non-monetary payment modes

Summary

We use a split-sample choice experiment to investigate the effects of alternative payment modes on the purchase of flood insurance among smallholder irrigation farmers in Ghana. Results show that insurance up-take is lower for insurance premium payments required in labour than comparable premiums required in harvest and money. The marginal willingness-to-pay for a one-year reduction in flood frequency is about 6 h in labour time, 30 kg in rice and 144 Ghana Cedis (US$37) per annum. The price elasticities of demand for flood insurance indicate an inelastic demand for insurance premiums under these three payment modes. In addition to revealing strong preferences for flood risk reduction among farmers in this region, these results imply that subsidy policies may be inadequate in increasing the purchase of weather insurance under these three payment modes.