The influence of direct payments on farmers’ hail insurance decisions

R. Finger, N. Lehmann

Research output: Contribution to journalArticleAcademicpeer-review

38 Citations (Scopus)

Abstract

We analyze determinants of hail insurance use of Swiss farmers, using FADN panel data covering the period 1990–2009. Mixed effect logistic regression models are estimated to identify the most important farm and farmer characteristics that trigger insurance use. In addition, information on local hail risk is taken into account in these models. It shows that larger farms, with specialization in 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. Our analysis shows that this development has contributed to decreasing hail insurance adoption rates in Switzerland over the period considered. Our results indicate that the larger the share of direct payments for total farm revenue, the less attractive is insurance as a risk management strategy for farmers. This interdependency should be explicitly considered by agricultural policy in the design of support mechanisms.
Original languageEnglish
Pages (from-to)343-354
JournalAgricultural Economics
Volume43
Issue number3
DOIs
Publication statusPublished - 2012

Keywords

  • common agricultural policy
  • risk
  • uncertainty
  • management
  • reforms

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