The value of forecasts: Experimental evidence from developing-country agriculture

Climate risk is a key driver of low agricultural productivity in poor countries. We use a cluster-randomized trial to evaluate a novel risk-mitigation approach: long-range forecasts that provide information about the onset of the Indian summer monsoon well in advance of its arrival. In contrast to traditional approaches that allow farmers to cope with risk ex post, this new ex ante technology provides accurate information at least one month in advance of the monsoon's arrival, enabling farmers to alter cropping choices and other up front input decisions. Moreover, forecasts have the potential to be disseminated cheaply, even at scale. We assign 250 villages to one of three groups: a control group; a group that is given an opportunity to purchase the forecast; and a group that is offered insurance. This design allows us to investigate farmers' willingness-to-pay for forecasts; measure how forecasts affect farmer beliefs, up-front investments, and welfare; and study how these effects compare to the canonical ex post loss mitigation tool: weather-based index insurance.