Risk aversion level influence on farmer’s decision to?participate in?crop insurance: A review

摘要

Agricultural insurance in?Indonesia is focused specifically on rice farming and is locally known as?Asuransi Usahatani Padi (AUTP). To?encourage farmer participation, the?government subsidises farmers’ cost of?insurance (premium) by?80%. Despite high subsidy, AUTP is still unable to?reach the?coverage target. The?objectives of?this study are to?investigate farmers’ Risk Aversion Level (RAL), its influence on farmers’ decision to?participate in?AUTP, and the?effect of?farmers’ participation in?AUTP on their income. The?result of?this study can contribute to?enriching agriculture insurance literature from the?point of?view of?developing countries and catalyse other studies on this matter especially in?Indonesia. The?analysis methods used in?this study were multiple pricelist designs and propensity score matching with a logistic regression model. 130 farmers were interviewed. The?results showed that?farmers tend to?have a high level of?risk aversion (82.3% of?farmers insure almost all of?their land). RAL has?a significant effect on farmers’ decision to?purchase AUTP ( 0.01). A positive value of?Average Treatment on the?Treated (ATT) indicated that?participation in?AUTP has?a positive impact on farmers’ income. AUTP is able to?absorb production risks and encourage use of?high input in?farming.