Risk, Poverty and the Impacts of Weather Index Insurance: Evidence from Rural Households in Northern Ethiopia

​In many developing countries, rural farmers are highly vulnerable to weather shocks which create uncertainties on their consumption, income and wealth. In response to an exposure to weather risk, farmers adopt vigilant farming behavior. Because of poor credit and insurance markets, they adopt costly risk management and coping strategies to smooth their livelihoods. For my PhD study, I propose to assess welfare and ex-post effects from the introduction of weather index insurance. The study attempts to address the following key impact questions: Does weather index insurance enhance welfare? Does it provide sufficient protection to smooth farmer's consumption and protect their asset? Does it increase the coping ability (resilience) of farmers against weather shocks? Does weather index insurance induce farmers to take greater risk and allow them to be engaged in higher productive farming activities? We also investigate how it affects different segments of the society (extremely poor, poor and relatively rich segments). The study will apply field/quasi-experimental approaches and use rural household panel data collected from Northern Ethiopia.