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An Experiment on the Impact of Weather Shocks and Insurance on Risky Investment

We conduct a framed field experiment in rural Ethiopia to test the seminal hypothesis that insurance provision induces farmers to take greater, yet profitable, risks. Farmers participated in a game protocol in which they were asked to make a simple decision: whether to purchase fertilizer, and if so, how many bags. The return to fertilizer was dependent on a stochastic weather draw made in each round of the game protocol. In later rounds of the game protocol, a random selection of farmers made this decision in the presence of a stylized weather-index insurance contract.

Contract Farming and Smallholder Incentives to Produce High Quality: Experimental evidence from the Vietnamese Dairy Sector

Producer penalties and bonuses can help reduce the incidence of side-selling and better align farmers' incentives with purchasers'. Bonuses can help ensure that farmers take the necessary measurements to produce the quality characteristics often present in contract farming arrangements. A randomized controlled experiment with milk producers in Vietnam showed that the presence of penalties and bonuses drove farmers to higher input use which resulted in higher quality milk.

Potential Collusion and Trust: Evidence from a Field Experiment in Vietnam

Part of the constraints facing contract farming are the lack of proper procedures for measuring quality in production. If the buyer handles quality assurance then they may have an incentive to report that production was of lower quality in order to offer a lower price. The producer knowing this, in turn will lower their expectation to the income from contact farming and be less likely to contract.

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