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Does market competitiveness significantly affect public intervention in agricultural insurance: the case in Italy

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  • Fabian Capitanio
  • Maria Bielza Diaz-Caneja
  • Carlo Cafiero
  • Felice Adinolfi

Abstract

Analyses of agricultural insurance failures often assume the existence of competitive supply, tracing the reasons for high insurance cost and limited farmer participation to informational problems, and suggesting the need for premium subsidization in order to increase participation. However, in countries such as Spain and Italy, where agricultural insurance is most highly subsidized, it could be that supply is not fully competitive. In this article, we explore the incidence of public subsidies to agricultural insurance premia when supply is noncompetitive. Through the use of a simple empirical model of an insurance market, it is shown that, while in the case of a competitive supply, subsidies to insurance would benefit farmers, a monopolistic supply would capture most of the subsidy, thus eliminating the potential incentive towards wider participation by farmers. The model is applied to a panel of Italian farms for different levels of risk aversion to demonstrate the limited effect that a subsidy to a hypothetical all risk yield insurance would have on farmer participation in the case of monopolistic supply.

Suggested Citation

  • Fabian Capitanio & Maria Bielza Diaz-Caneja & Carlo Cafiero & Felice Adinolfi, 2011. "Does market competitiveness significantly affect public intervention in agricultural insurance: the case in Italy," Applied Economics, Taylor & Francis Journals, vol. 43(27), pages 4149-4159.
  • Handle: RePEc:taf:applec:v:43:y:2011:i:27:p:4149-4159
    DOI: 10.1080/00036846.2010.487823
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    References listed on IDEAS

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    1. Davidson, Russell & MacKinnon, James G., 1993. "Estimation and Inference in Econometrics," OUP Catalogue, Oxford University Press, number 9780195060119.
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    Cited by:

    1. Enjolras, Geoffroy & Capitanio, Fabian & Adinolfi, Felice, 2012. "The Demand for Crop Insurance: Combined Approaches for France and Italy," Agricultural Economics Review, Greek Association of Agricultural Economists, vol. 13(1), January.
    2. Capitanio, Fabian & Adinolfi, Felice & Di Pasquale, J. & Contò, F., 2013. "¿Cuáles son los determinantes de la demanda de seguros agrícolas en Italia?," Economia Agraria y Recursos Naturales, Spanish Association of Agricultural Economists, vol. 13(1).

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