In the Northern Region of Ghana, smallholder famers often fail to invest in their farms, even when doing so could be profitable. Innovations for Poverty Action (IPA) designed a randomized controlled trial (RCT), launched in 2009 and continuing into 2012, to explore this phenomenon, with a specific focus on whether capital constraints or risk aversion explain farmers’ decisions to underinvest. The “Examining Underinvestment in Agriculture” (EUI) project was implemented in 74 communities across the Northern Region, and 1,350 smallholder farmers living in these communities were randomly selected to receive “treatments” of capital, rainfall index insurance, both capital and insurance, or neither. The study’s design as a randomized controlled trial allows investigators to determine the impact of each treatment on populations statistically identical to each other.
Karlan, D.; Akoto, I.O.; Osei, R.; Udry, C. Examining Underinvestment in Agriculture (IGC Policy Brief). International Growth Centre (IGC), London, UK (2012) 6 pp.