TY - JOUR
T1 - Adoption of crop insurance in Ghana
T2 - an application of the complementary log-log truncated Poisson double-hurdle model
AU - Addey, Kwame Asiam
AU - Jatoe, John Baptist D.
AU - Kwadzo, George Tsey Mensah
N1 - Publisher Copyright:
© 2020, Emerald Publishing Limited.
PY - 2021/1/21
Y1 - 2021/1/21
N2 - Purpose: The aim of this paper is to identify the factors that influence rice farmers' decisions to adopt crop insurance and premium payments (willingness to pay [WTP] amounts). The paper also demonstrates the usefulness of the complementary log-log (cloglog) truncated Poisson double-hurdle model as an alternative hurdle model. Design/methodology/approach: The study first investigated the nature of the dependent variable, which had non-normal residuals and was overdispersed. The probit truncated normal regression double-hurdle model was tried but it failed the normality and homoscedasticity tests; hence, the cloglog truncated Poisson double-hurdle model was employed in the study. Findings: An estimated 61% of respondents would purchase crop insurance, despite farmers not having prior experience with this product. Amongst others, the factors that influence insurance adoption amongst rice farmers are the share of rice in total income, reliability perception of crop insurance schemes and the probability of failure to achieve target yields. The latter helps the authors to address adverse selection, a central issue to the viability of such an insurance programme. The determinants of farmers' WTP are also identified. Research limitations/implications: Sampling was limited to farmers using irrigation and living in one region of Ghana, which may limit the study’s wider applicability. Originality/value: As far as the authors are aware, this study is the first to select the appropriate hurdle model based on established properties of the dependent variable on this topic – crop insurance decisions.
AB - Purpose: The aim of this paper is to identify the factors that influence rice farmers' decisions to adopt crop insurance and premium payments (willingness to pay [WTP] amounts). The paper also demonstrates the usefulness of the complementary log-log (cloglog) truncated Poisson double-hurdle model as an alternative hurdle model. Design/methodology/approach: The study first investigated the nature of the dependent variable, which had non-normal residuals and was overdispersed. The probit truncated normal regression double-hurdle model was tried but it failed the normality and homoscedasticity tests; hence, the cloglog truncated Poisson double-hurdle model was employed in the study. Findings: An estimated 61% of respondents would purchase crop insurance, despite farmers not having prior experience with this product. Amongst others, the factors that influence insurance adoption amongst rice farmers are the share of rice in total income, reliability perception of crop insurance schemes and the probability of failure to achieve target yields. The latter helps the authors to address adverse selection, a central issue to the viability of such an insurance programme. The determinants of farmers' WTP are also identified. Research limitations/implications: Sampling was limited to farmers using irrigation and living in one region of Ghana, which may limit the study’s wider applicability. Originality/value: As far as the authors are aware, this study is the first to select the appropriate hurdle model based on established properties of the dependent variable on this topic – crop insurance decisions.
KW - Cloglog truncated Poisson double-hurdle model
KW - Crop insurance
KW - Fano factor
KW - Generalized linear models
KW - Ghana
KW - Moments-equality
KW - Rice
UR - http://www.scopus.com/inward/record.url?scp=85087176217&partnerID=8YFLogxK
U2 - 10.1108/AFR-06-2019-0062
DO - 10.1108/AFR-06-2019-0062
M3 - Article
AN - SCOPUS:85087176217
SN - 0002-1466
VL - 81
SP - 76
EP - 93
JO - Agricultural Finance Review
JF - Agricultural Finance Review
IS - 1
ER -