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Effects of agricultural policy reforms and farm characteristics on income risk in Swiss agriculture

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  • Nadja El Benni
  • Robert Finger
  • Stefan Mann

Abstract

Purpose - The purpose of this study is to examine the effects of agricultural policy reform – specifically the change from market to direct payment support – on income variability of Swiss farming households. In addition, the observed heterogeneity in income risks across farms and time is explained in terms of farm and regional characteristics. Design/methodology/approach - Unbalanced farm‐level panel data of the Swiss farm accountancy network (FADN) are used to construct coefficients of variation of five‐year overlapping time intervals for total household income and gross farm revenues over the period 1992 to 2009. Linear fixed effect models are applied to measure the effect of specialization, off‐farm income, direct payments, farm size, and liquidity on the variability of gross farm revenues and household income in the valley, hill, and mountain regions. Findings - The switch from market‐based support to direct payments has decreased the variability of farm revenues and household income. The strong reliance on direct payments serves as insurance for most farmers and reduces both household income and revenue risk. Off‐farm income can be used by farmers to reduce household income risk but it increases revenue risk in the valley regions. In all of the regions considered, farm size has a positive effect on household income risk and a negative effect on revenue risk. A high degree of specialization increases both gross revenue and household income risk. Potential revenue insurance contracts should specify farmers' off‐farm employment, the degree of specialization, farm size, and regional specific risk profiles. Originality/value - This paper assesses the complementary effects of specific farm characteristics and risk management strategies with regard to both farm revenue and household income risk. Influences of agricultural policy changes on income risks are also empirically assessed at different spatial scales.

Suggested Citation

  • Nadja El Benni & Robert Finger & Stefan Mann, 2012. "Effects of agricultural policy reforms and farm characteristics on income risk in Swiss agriculture," Agricultural Finance Review, Emerald Group Publishing Limited, vol. 72(3), pages 301-324, November.
    • Handle: RePEc:eme:afrpps:v:72:y:2012:i:3:p:301-324
    DOI: 10.1108/00021461211277204
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    Citations

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    Cited by:

    1. Harkness, Caroline & Areal, Francisco J. & Semenov, Mikhail A. & Senapati, Nimai & Shield, Ian F. & Bishop, Jacob, 2023. "Towards stability of food production and farm income in a variable climate," Ecological Economics, Elsevier, vol. 204(PA).
    2. Edward Knapp & Jason Loughrey, 2017. "The single farm payment and income risk in Irish farms 2005–2013," Agricultural and Food Economics, Springer;Italian Society of Agricultural Economics (SIDEA), vol. 5(1), pages 1-15, December.
    3. Duden, C. & Offermann, F., 2019. "Farmers' risk exposition and its drivers," 171st Seminar, September 5-6, 2019, Zürich, Switzerland 333722, European Association of Agricultural Economists.
    4. Soliwoda, Michał & Kulawik, Jacek & Góral, Justyna, 2016. "Stabilizacja dochodów rolniczych. Perspektywa międzynarodowa, Unii Europejskiej i Polski," Village and Agriculture (Wieś i Rolnictwo), Polish Academy of Sciences (IRWiR PAN), Institute of Rural and Agricultural Development, vol. 3(172), January.
    5. Severini, Simone & Tantari, Antonella & Di Tommaso, Giuliano, 2016. "The instability of farm income. Empirical evidences on aggregation bias and heterogeneity among farm groups," Bio-based and Applied Economics Journal, Italian Association of Agricultural and Applied Economics (AIEAA), vol. 5(1), pages 1-19, April.
    6. S. Severini & A. Tantari & G. Di Tommaso, 2016. "Do CAP direct payments stabilise farm income? Empirical evidences from a constant sample of Italian farms," Agricultural and Food Economics, Springer;Italian Society of Agricultural Economics (SIDEA), vol. 4(1), pages 1-17, December.
    7. Daria Loginova & Stefan Mann, 2022. "Institutional contributions to agricultural producer price stability," Agricultural and Food Economics, Springer;Italian Society of Agricultural Economics (SIDEA), vol. 10(1), pages 1-22, December.
    8. S. Severini & A. Tantari & G. Di Tommaso, 2016. "Do CAP direct payments stabilise farm income? Empirical evidences from a constant sample of Italian farms," Agricultural and Food Economics, Springer;Italian Society of Agricultural Economics (SIDEA), vol. 4(1), pages 1-17, December.
    9. Alexander Zorn & Franziska Zimmert, 2022. "Structural change in the dairy sector: exit from farming and farm type change," Agricultural and Food Economics, Springer;Italian Society of Agricultural Economics (SIDEA), vol. 10(1), pages 1-31, December.
    10. Yann de Mey & Erwin Wauters & Dierk Schmid & Markus Lips & Mark Vancauteren & Steven Van Passel, 2016. "Farm household risk balancing: empirical evidence from Switzerland," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 43(4), pages 637-662.
    11. Luigi Biagini & Simone Severini, 2022. "Can Machine Learning discover the determining factors in participation in insurance schemes? A comparative analysis," Papers 2212.03092, arXiv.org, revised Dec 2022.
    12. Dörschner, Till & Musshoff, Oliver, 2013. "Does the risk attitude influence the farmers' willingness to participate in agri-environmental measures? – A normative approach to evaluate ecosystem services," 53rd Annual Conference, Berlin, Germany, September 25-27, 2013 156112, German Association of Agricultural Economists (GEWISOLA).
    13. Assa, Hirbod & Sharifi, Hossein & Lyons, Andrew, 2021. "An examination of the role of price insurance products in stimulating investment in agriculture supply chains for sustained productivity," European Journal of Operational Research, Elsevier, vol. 288(3), pages 918-934.
    14. Weiying Liu & Sriram Shankar & Lihua Li, 2021. "Is specialization a strategy to improve farm efficiency in northwest China?," Review of Development Economics, Wiley Blackwell, vol. 25(3), pages 1695-1710, August.
    15. Unknown, 2023. "Farmer’s adoption of agricultural insurance for Mediterranean crops as an innovative behavior," Economia agro-alimentare / Food Economy, Italian Society of Agri-food Economics/Società Italiana di Economia Agro-Alimentare (SIEA), vol. 25(2), October.
    16. Gönül Sevinç & Mustafa Hakkı Aydoğdu & Mehmet Cançelik & Mehmet Reşit Sevinç, 2019. "Farmers’ Attitudes toward Public Support Policy for Sustainable Agriculture in GAP-Şanlıurfa, Turkey," Sustainability, MDPI, vol. 11(23), pages 1-14, November.
    17. Freyens, Ben & Mann, Stefan, 2016. "Part-Time Farming And Farm Resilience: Evidence From Australia," 56th Annual Conference, Bonn, Germany, September 28-30, 2016 244863, German Association of Agricultural Economists (GEWISOLA).
    18. Dörschner, T. & Mußhoff, O., 2014. "Does the Risk Attitude Influence and Farmers’ Willingness to Participate in Agri-Environmental Measures? – A Normative Approach to Evaluate Ecosystem Services," Proceedings “Schriften der Gesellschaft für Wirtschafts- und Sozialwissenschaften des Landbaues e.V.”, German Association of Agricultural Economists (GEWISOLA), vol. 49, March.
    19. Atomu Nitta & Yasutaka Yamamoto & Simone Severini & Katsunobu Kondo & Daisuke Sawauchi, 2022. "Effects of direct payments on rice income variability in Japan," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 66(1), pages 118-135, January.
    20. Pastusiak, Radosław & Jasiniak, Magdalena & Stawska, Joanna & Soliwoda, Michał, 2017. "Znaczenie dochodów pozarolniczych w gospodarstwach rolnych Kanady i USA," Village and Agriculture (Wieś i Rolnictwo), Polish Academy of Sciences (IRWiR PAN), Institute of Rural and Agricultural Development, vol. 1(174).
    21. de Mey, Yann & Wauters, Erwin & Lips, Markus & Schmid, Dirk & Vancauteren, Mark & Van Passel, Steven, 2014. "Farm household risk balancing in Switzerland and Belgium: an econometric and survey approach," 2014 International Congress, August 26-29, 2014, Ljubljana, Slovenia 186678, European Association of Agricultural Economists.
    22. Radosław PASTUSIAK & Magdalena JASINIAK & Michał SOLIWODA & Joanna STAWSKA, 2017. "What may determine off-farm income? A review," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 63(8), pages 380-391.
    23. Harkness, Caroline & Areal, Francisco J. & Semenov, Mikhail A. & Senapati, Nimai & Shield, Ian F. & Bishop, Jacob, 2021. "Stability of farm income: The role of agricultural diversity and agri-environment scheme payments," Agricultural Systems, Elsevier, vol. 187(C).

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