ABSTRACT

Farmers’ Perception of Climate Change and Willingness to Pay for Weather Index-Based Insurance in Bahunepati, Nepal

From August to October 2014, we conducted a field study in Bahunepati, Nepal to examine the effective mechanism to cope with climate change. The village is located in the Sindhupalchok district in the Hill Belt. We randomly selected 353 households to interview with an overall response rate of 72% for the survey. This is a pioneering study of investigating effects of farmers’ perception of climate change on their willingness to pay (WTP) for a weather-index crop insurance in Nepal.

We designed two insurance products: Product A insures rice, and Product B adds five main livestock. The research improves on the previous literature by analyzing two crop insurance products which incorporate both crop and livestock. We used perception of future climate change (ex-ante perception) and perception of past impacts of climate change (ex-post perception) to measure farmers’ perception of climate change.

Results show that people who are aware of climate change are around 18% and 16% more likely to pay for insurance product A and B. I also find that the effect of other existing mitigation strategies crowds out people’s WTP. In addition, the annually mean WTPs are 1.6% and 3% of household income for product A and product B, respectively.

Graduate Student: Wenmei Guo