Do Direct Payments Influence Farmers' Hail Insurance Decisions?
AbstractWe 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 InfoPaper provided by European Association of Agricultural Economists in its series 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland with number 114355.
Date of creation: 2011
Date of revision:
Risk and Uncertainty;
This paper has been announced in the following NEP Reports:
- NEP-AGR-2011-10-15 (Agricultural Economics)
- NEP-ALL-2011-10-15 (All new papers)
- NEP-IAS-2011-10-15 (Insurance Economics)
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