POTENTIAL DEMAND FOR DROUGHT INSURANCE IN BURKINA-FASO AND ITS DETERMINANTS

The objectives of this paper are twofold: (a) to estimate demand for f ormal drought insurance using farm household data in Burkina Faso and (b) to find what determines insurance demand. The following findings a re salient. First, effective demand is found in all zones, which impli es inadequacies in households' current self-insurance strategies. Seco nd, there is much heterogeneity in the strategies to self-insure even within zones. Third, the expectation of public food aid decreases dema nd for drought insurance, which suggests that food aid is causing mora l hazard. Fourth, households with large livestock holdings can reduce the size of herd by substituting drought insurance for livestock holdi ngs.