Willingness to pay for weather index insurance linked to production cost: An application to Ethiopia

Weather index insurance (WII) has been introduced in pilot form in several developing countries as a tool to help poor farmers deal with rainfall risk. However, uptake has typically been quite low. This policy brief, deals with willingness to pay (WTP) for weather insurance as it pertains to productive decisions of low-income farm households in developing countries. The product examined is designed to cover the risk faced by farmers who incur a cost for modern inputs to apply to their farms, but face the risk of not being able to recoup that outlay if rainfall on their farms is low.