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

Author

Listed:
  • 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, vol. 72(3), pages 301-324, November.
  • Handle: RePEc:eme:afrpps:v:72:y:2012:i:3:p:301-324
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    1. repec:spr:agfoec:v:5:y:2017:i:1:d:10.1186_s40100-017-0078-9 is not listed on IDEAS
    2. repec:ags:polvaa:262398 is not listed on IDEAS
    3. 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. 0(Issue 1), pages 1-19, April.
    4. 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.
    5. 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, Foundation for the European Review of Agricultural Economics, vol. 43(4), pages 637-662.
    6. 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).
    7. repec:ags:gewipr:261494 is not listed on IDEAS
    8. repec:ags:polvaa:268634 is not listed on IDEAS
    9. 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.

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