The value of forecasts: Experimental evidence from India
Working Paper 32173
DOI 10.3386/w32173
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Unpredictable weather makes it challenging for households and firms to make optimal investment decisions. Technologies that reduce these risks are crucial for climate change adaptation. We experimentally evaluate one such technology—an accurate, localized, early monsoon onset forecast—in India, randomizing 250 villages into control, forecast, or insurance. The forecast changes farmers' beliefs about the coming growing season. In response, forecast farmers adapt their behavior along multiple margins, changing cultivated area, crop choice, farm input expenditure, and off-farm business. By enabling farmers to tailor their investments to coming weather, forecasts reduce farmers' risk exposure and increase aggregate welfare.
Non-Technical Summaries
- Climate change is making weather patterns around the world more volatile, increasing risks for farmers. Providing farmers with accurate...