Abstract/Summary

Malaria is seen as one of the diseases that has prevented the African continent from achieving its main goal of food availability, security and sustainable development. One major problem policy makers seem to face all the time is the precise amount the households are willing to pay for a particular prophylactic measure. The epidemiology of the disease on the continent has made this measure difficult and adopting a stated preference approach has not been very helpful. Also, the link between malaria incidence and agricultural productivity has not been fully explored in the literature. Thus, the aims of this research are; to measure how much malaria impacts on farmers technical efficiency and the application of these values to present a reliable measure of the farmers’ Willingness-To-Pay for malaria abatement in Ethiopia. We use data set from Ethiopia with the respective spatial malaria prevalence data set from the Malaria Atlas Project. We apply this data set to the envelope theorem to arrive at a reliable estimate of the Willingness-To-Pay and a measure of how much malaria affects farmers’ technical efficiency. The merger of the household data set with the spatial malaria data set, and, the innovative use of the envelope theorem is one of the major high points of this research. We apply the Bayesian Econometrics to our empirical frame- work. The results show that in Ethiopia, malaria affects efficiency and has the a priori sign. The result further states that for a 100 unit increase in malaria the household is willing to pay, on the average, US$ 0.12 to purchase prophylactic measures. Policy makers can use these values to introduce minimum prices and gradual repayment schemes for prophylactic measures. Keywords: willingness-to-pay, household model, Roy’s identity, Bayesian analysis