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Imperfect Information and Participation in Insurance Markets: Evidence from Italy

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  • Santeramo, Fabio Gaetano

Abstract

Participation in crop insurance programs is lowered by imperfect knowledge resulting in adverse selection and moral hazard problems. We aim at investigating how experience in insurance contracts may influence participation in the Italian crop insurance market. From Italian farm-level data we estimate a dynamic discrete choice model of participation to investigate the role of experience. The methodology, coupled with exploratory analysis of the data, allows one to compare the relevance of different sources of experience in the crop insurance decision making process. We found that experience tend to be a catalyst for insurance participation. Policy implications are discussed: in particular we discuss on the importance of bolstering uptake to exploit the advantages of the inertia and spillover effects that emerge from experience. To the best of our knowledge, the role of experience has been underinvestigated. Our analysis has the specific contribution of modeling the potential role of experience (exploited after buying an insurance contract) on uptake in crop insurance programs.

Suggested Citation

  • Santeramo, Fabio Gaetano, 2017. "Imperfect Information and Participation in Insurance Markets: Evidence from Italy," MPRA Paper 85780, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:85780
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    Cited by:

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    2. Tappi, Marco & Nardone, Gianluca & Santeramo, Fabio Gaetano, 2022. "On the relationships among durum wheat yields and weather conditions: evidence from Apulia region, Southern Italy," Bio-based and Applied Economics Journal, Italian Association of Agricultural and Applied Economics (AIEAA), vol. 11(2), July.
    3. Ruggiero Rippo & Simone Cerroni, 2023. "Farmers' participation in the Income Stabilisation Tool: Evidence from the apple sector in Italy," Journal of Agricultural Economics, Wiley Blackwell, vol. 74(1), pages 273-294, February.
    4. Tappi, Marco & Carucci, Federica & Gatta, Giuseppe & Giuliani, Marcella Michela & Lamonaca, Emilia & Santeramo, Fabio Gaetano, 2023. "Temporal and design approaches and yield-weather relationships," MPRA Paper 117488, University Library of Munich, Germany.
    5. Alessandro Banterle & Daniela Vandone, 2019. "Price volatility and risk management: The case of rice in the EU," Economia agro-alimentare, FrancoAngeli Editore, vol. 21(2), pages 255-274.
    6. Fabio G., Santeramo & Ilaria, Russo & Emilia, Lamonaca, 2022. "Italian subsidised crop insurance: what the role of policy changes," MPRA Paper 115299, University Library of Munich, Germany.
    7. Coletta, Attilio & Giampietri, Elisa & Santeramo, Fabio Gaetano & Severini, Simone & Trestini, Samuele, 2018. "A preliminary test on risk and ambiguity attitudes, and time preferences in decisions under uncertainty: towards a better explanation of participation in crop insurance schemes," Bio-based and Applied Economics Journal, Italian Association of Agricultural and Applied Economics (AIEAA), vol. 7(3), December.
    8. Donatella Porrini & Giulio Fusco & Pier Paolo Miglietta, 2019. "Post-Adversities Recovery and Profitability: The Case of Italian Farmers," IJERPH, MDPI, vol. 16(17), pages 1-12, September.
    9. Fabio G Santeramo, 2019. "I Learn, You Learn, We Gain Experience in Crop Insurance Markets," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 41(2), pages 284-304, June.
    10. Trestini, Samuel & Giampietri, Elisa & Smiglak-Krajewska, Magdalena, 2018. "Farmer behaviour towards the agricultural risk management tools provided by the CAP: a comparison between Italy and Poland," 162nd Seminar, April 26-27, 2018, Budapest, Hungary 271978, European Association of Agricultural Economists.
    11. De Salvo, Maria & Capitello, Roberta & Gaudenzi, Barbara & Begalli, Diego, 2019. "Risk management strategies and residual risk perception in the wine industry: A spatial analysis in Northeast Italy," Land Use Policy, Elsevier, vol. 83(C), pages 47-62.
    12. Marco Rogna & Günter Schamel & Alex Weissensteiner, 2023. "Modelling the switch from hail insurance to antihail nets," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 67(1), pages 118-136, January.
    13. Qingyin Cai & Yulian Ding & Calum Tuvey & Yuehua Zhang, 2021. "The influence of past experience on farmers’ preferences for hog insurance products: a natural experiment and choice experiment in China," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 46(3), pages 399-421, July.
    14. Antonio De Pin & Pier Paolo Miglietta & Benedetta Coluccia & Fabian Capitanio, 2022. "Agricultural Insurance in the DOCG Area of Conegliano—Valdobbiadene: An Assessment of Policy Measures," Sustainability, MDPI, vol. 14(11), pages 1-14, June.
    15. Fabio Gaetano Santeramo & Emilia Lamonaca, 2021. "Food Loss–Food Waste–Food Security: A New Research Agenda," Sustainability, MDPI, vol. 13(9), pages 1-7, April.
    16. Simone Severini & Cinzia Zinnanti & Valeria Borsellino & Emanuele Schimmenti, 2021. "EU income stabilization tool: potential impacts, financial sustainability and farmer’s risk aversion," Agricultural and Food Economics, Springer;Italian Society of Agricultural Economics (SIDEA), vol. 9(1), pages 1-21, December.

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    More about this item

    Keywords

    Asymmetric information; Dynamic model; Familiarity; Imperfect Knowledge; Uptake;
    All these keywords.

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy

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