Potential effects of the income stabilisation tool (IST) in Swiss agriculture

We extend the existing literature on the income stabilisation tool (IST) by investigating the influence of farm and farmers' characteristics on potential indemnification applying double-hurdle models on a rich panel data set on Swiss farms. We find more likely and higher indemnifications for part-time and low-income farmers. Thus, the IST might become a new transfer instrument hampering the structural change. Even though the estimated costs of the IST are low compared with the current direct payment level in Switzerland, both policy measures are partly substitutes with respect to income risk reductions implying more frequent and higher indemnification through the IST if direct payments are reduced.