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Do Direct Payments Influence Farmers' Hail Insurance Decisions?

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  • Finger, Robert
  • Lehmann, Niklaus

Abstract

We analyze determinants of hail insurance use of Swiss farmers, covering the period 1990-2009 using FADN panel data. Mixed effect logistic regression models are estimated to identify the most important farm and farmer characteristics that determine insurance use. In addition, information on local hail risk is taken into account in these models. It shows that larger farms, with specialization on crop production, and with larger local hail risks are more likely to adopt the hail insurance. Moreover, insurance users are usually older and better educated. Since the early 1990s, Swiss agricultural policy has reduced price support and introduced general and ecological direct payments. This has led to a much higher importance of direct payments for farmers’ incomes. We find that this development has contributed to decreasing hail adoption rates in Switzerland in the considered period, due to the insurance and wealth effects of direct payments. Our results indicate that the larger the share of direct payments for total farm revenue, the more subsidies would be required to induce hail insurance adoption. Thus, agricultural policy should explicitly consider this interdependency.

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Bibliographic Info

Paper provided by European Association of Agricultural Economists in its series 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland with number 114355.

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Date of creation: 2011
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Handle: RePEc:ags:eaae11:114355

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Keywords: Risk and Uncertainty;

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  3. Femenia, Fabienne & Gohin, Alexandre & Carpentier, Alain, 2008. "The decoupling of farm programs: Revisiting the wealth effect," 108th Seminar, February 8-9, 2008, Warsaw, Poland 48107, European Association of Agricultural Economists.
  4. Oliver Musshoff & Martin Odening & Wei Xu, 2009. "Management of climate risks in agriculture-will weather derivatives permeate?," Applied Economics, Taylor & Francis Journals, vol. 43(9), pages 1067-1077.
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  8. Finger, Robert & Lazzarotto, Patrick & Calanca, Pierluigi, 2010. "Bio-economic assessment of climate change impacts on managed grassland production," Agricultural Systems, Elsevier, vol. 103(9), pages 666-674, November.
  9. Enjolras, Geoffroy & Sentis, P., 2008. "The Main Determinants of Insurance Purchase: An Empirical Study on Crop Insurance Policies in France," 2008 International Congress, August 26-29, 2008, Ghent, Belgium 44395, European Association of Agricultural Economists.
  10. El Benni, Nadja & Mann, Stefan & Lehmann, Bernard, 2011. "Distributional effects of direct payments in Switzerland," 122nd Seminar, February 17-18, 2011, Ancona, Italy 99368, European Association of Agricultural Economists.
  11. Stefan Mann, 2005. "Farm Size Growth and Participation in Agri-environmental Schemes: A Configural Frequency Analysis of the Swiss Case," Journal of Agricultural Economics, Wiley Blackwell, vol. 56(3), pages 373-384.
  12. VanSickle, John J. & Weldon, Richard N. & Jung, Jione, 2005. "Specialty crop producers' crop insurance decisions," 2005 Annual Meeting, February 5-9, 2005, Little Rock, Arkansas 35621, Southern Agricultural Economics Association.
  13. Cabas, Juan H. & Leiva, Akssell J. & Weersink, Alfons, 2008. "Modeling Exit and Entry of Farmers in a Crop Insurance Program," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 37(1), April.
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