Effects of weather index insurance adoption on household food consumption and investment in agricultural inputs in Ethiopia

Abstract

Weather index insurance is an innovative pro-poor climate risk management strategy that can benefit the poor. But evidence on the welfare impact of this innovation is scant. This study examines the impact of adoption of weather index-based insurance (IBI) for crops on household food consumption and investment in agricultural inputs using the difference-in-difference estimator. Results indicate that adoption of insurance has causally increased household food consumption and investment in high-risk high-return agricultural inputs. Further, accounting for the intensity of adoption, results suggest that repeated uptake of weather index insurance has cumulative lasting effect on household food consumption and investment in agricultural inputs.