Bundling Stress Tolerant Seeds and Insurance for More Resilient and Productive Small-scale Agriculture
Risk often inhibits on-farm investment by smallholder farmers. Recent evidence indicates that index insurance and stress tolerant seeds can separately and partially offset this risk effect. In this study, we explore whether the complementarities between these two risk management technologies can be harnessed to underwrite a resilient, high productivity small farm sector. Utilizing a multi-year randomized control trial that spanned two countries and exploits natural variation in weather shocks, we find that drought tolerant maize seeds mitigate the impact of mid-season drought. Compared to farms in control villages, where shocks have persistent effects that reduce future investment and productivity, those with access to both drought tolerant seeds and multi-peril index insurance show greater resilience and immediately bounce back from shocks. Experiential learning is key to realizing this resilience effect: Farmers who experienced shocks intensify their subsequent use of the technologies and exhibit what we call resilience-plus, while those who did not experience shocks disadopt. Together these findings showcase important complementarities between these risk mitigating technologies and the crucial role learning plays in tapping their potential stochastic and dynamic benefits to small farmers.
This study was made possible through the generous support of the American people through the United States Agency for International Development Cooperative Agreement No. AID-OAA-L-12-00001 with the BASIS Feed the Future Innovation Lab. The contents are the responsibility of the authors and do not reflect the views of the US Government. We also thank our respondents and our commercial partners. The project’s activities in both countries were ruled Exempt under Category 2 by the IRB at the University of California, Davis. Project numbers: 905582-1 (Mozambique), 905584-1 (Tanzania). Tanzania research permits issued by the Tanzanian Commission on Science and Technology, No. 2016-83-NA-2015-272, No. 2017-106-NA-2015-272, and No. 2018-237-NA-2015-272. This RCT was registered in the American Economic Association Registry for randomized control trials under trial numbers AEARCTR-0002700 and AEARCTR-0002702. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.