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Article
Publication date: 8 March 2018

Adam Wąs and Pawel Kobus

The purpose of this paper is to identify the factors that determine demand for crop insurance in Poland.

Abstract

Purpose

The purpose of this paper is to identify the factors that determine demand for crop insurance in Poland.

Design/methodology/approach

To examine the determinants of decisions regarding crop insurance, the authors used logistic regression. The base source of data for the analysis was the 2013 FADN sample. The scale of yield losses, the indemnities received and the Arrow-Pratt risk aversion coefficient were examined in a representative sample of farms in consecutive years in the period 2004-2013.

Findings

Losses are the major determinants of crop insurance uptake. Additionally, it was observed that the economic determinants are in line with the expected utility theory, while contrary to expectations, farmer’s characteristics such as education level, age or even risk aversion did not prove to have any influence on crop insurance uptake.

Research limitations/implications

The FADN sample is representative as regards the type of farming, economic size of farm and location of the farm. Every farm in the sample represents a specific number of similar farms in the population. However, it must be emphasised that the representativeness of the sample with respect to other determinants, e.g., yield losses in previous years, using crop insurance or the farmers’ age and education has not been verified due to lack of data characterizing the general population with regard to these factors.

Practical implications

It could be argued that the system of crop insurance subsidies should be targeted to encourage the farmers who previously had not used insurance to join the system.

Originality/value

The paper presents the analysis of crop insurance uptake in a country with a strongly polarised agriculture. The Polish farm sector consists of 1.4 million farms with sizes ranging from 1 ha to over a few thousands hectares. The research is based on a data set of 5,202 farms which contains data from ten years (2004-2013). The novelty of the methodological approach is that it includes information on the number of farms represented by every farm in the FADN sample in the Horvitz-Thompson estimator in order to achieve results which are valid for the general population of Polish farms.

Details

Agricultural Finance Review, vol. 78 no. 2
Type: Research Article
ISSN: 0002-1466

Keywords

Article
Publication date: 14 January 2021

Ruojin Zhang, Dan Fan, Gene Lai, Junqian Wu and Jungong Li

Agricultural insurance has become increasingly important to farmers' livelihood and production in rural China. Yet despite the enormous governmental subsidizing efforts, the…

Abstract

Purpose

Agricultural insurance has become increasingly important to farmers' livelihood and production in rural China. Yet despite the enormous governmental subsidizing efforts, the insurance participation rate remains below expectations. This study revisits the linkage between farmers' risk attitudes and crop insurance utilization by providing a cross-cutting perspective such that the role of risk aversion is re-scrutinized in Chinese “kindred” village economies.

Design/methodology/approach

The authors administrated a lottery-based multiple price list (MPL) experiment by recruiting rice farmers from 12 villages in Sichuan province in southwestern China. Using the experimental data, farmers' risk attitudes are assessed and coefficients of risk aversion are estimated within the rank-dependent expected utility (RDEU) framework by maximizing a structured likelihood function.

Findings

This study provides substantiating evidence that rice farmers in southwestern China exhibit relatively high risk aversion. The authors also provide suggestive evidence of the positive relationship between farmers' risk aversion and crop insurance utilization. In addition, findings reveal that kinship network has a negative effect on crop insurance utilization, such that farmers who are connected in higher degree of kinship network have lower likelihood of crop insurance utilization, which suggests that kinship network may be substitute for formal crop insurance. Result also demonstrates that the incentive effect of risk aversion on farmers' crop insurance participation manifests differently depending on the degree of kinship network in rural China.

Originality/value

This study provides a cross-cutting perspective by scrutinizing the effects of farmers' risk attitudes and kinship network on crop insurance participation in rural China, which has received relatively little attention in the literature. Conclusions on the effects of risk aversion on crop insurance participation have been mixed in previous studies. In addition, to the best of our knowledge, little has been done to explicitly examine the influence of social proximity and networks on farmers' insurance uptake. This study attempts to fill both gaps. This study provides new insights which might shed lights on the understanding of farmers' crop insurance participation in rural China.

Details

Agricultural Finance Review, vol. 81 no. 5
Type: Research Article
ISSN: 0002-1466

Keywords

Article
Publication date: 9 March 2018

Marcel van Asseldonk, Harold van der Meulen, Ruud van der Meer, Huib Silvis and Petra Berkhout

The purpose of this paper is to determine which factors influence the choice to adopt subsidized multi-peril crop insurance (MPCI) in the Netherlands and whether prior hail…

Abstract

Purpose

The purpose of this paper is to determine which factors influence the choice to adopt subsidized multi-peril crop insurance (MPCI) in the Netherlands and whether prior hail insurance uptake is one of the determinants of MPCI adoption. In addition, it is analyzed whether subsidized MPCI has reduced disaster relief spending.

Design/methodology/approach

Cross-sectional survey with 512 respondents using a stratified design comprising MPCI adopters and non-adopters sampled from the Dutch national census data base. The national census, including information on subsidized MPCI adoption from 2010 up to and including 2015, was supplemented with information on (prior) traditional market-based hail insurance uptake, and other underlying determining factors were elicited. Logistic regression analysis was used to determine which factors influence the choice to adopt MPCI.

Findings

Analysis of MPCI adoption reveals that subsidized MPCI mainly substituted for market-based hail insurance uptake up to now. Growers who did not insure against hail in the past were hardly reached. Approximately, three-quarter of MPCI adopters insured hail prior to market introduction of MPCI. In the arable sector, MPCI adoption was 2.89 (p<0.01) more likely for prior hail insurance adopters compared to non-adopters, while it was 9.67 (p<0.01) more likely in the fruit sector.

Research limitations/implications

In the arable sector, it is expected that MPCI uptake in the coming years will reach more prior non-adopters of hail insurance as demand is expected to increase. Prior hail insurance adopters in the arable sector can be seen as the early MPCI adopters. In the fruit sector, adoption rates are already at a relative high level and a further significant increase by targeting non-adopters of hail insurance is not likely.

Originality/value

Governmental support has crowded out to some extend traditional market-based hail insurance in the Netherlands. Since the Common Agricultural Policy of the European Union is creating more momentum to subsidize crop insurance more member states with a long history of a mature hail insurance market may be confronted with similar crowding-out effects.

Details

Agricultural Finance Review, vol. 78 no. 2
Type: Research Article
ISSN: 0002-1466

Keywords

Article
Publication date: 23 February 2018

Fabio Gaetano Santeramo

The purpose of this paper is to investigate how experience in insurance contracts may influence participation in the Italian crop insurance market.

Abstract

Purpose

The purpose of this paper is to investigate how experience in insurance contracts may influence participation in the Italian crop insurance market.

Design/methodology/approach

From Italian farm-level data, the author estimates 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.

Findings

The author found that experience tends to be a catalyst for insurance participation. Policy implications are discussed, in particular, the author discusses on the importance of bolstering uptake to exploit the advantages of the inertia that emerge from experience, and the importance of initiatives to increase the knowledge of crop insurance instruments.

Originality/value

To the best of the author’s knowledge, the role of experience has been underinvestigated. The analysis has the specific contribution of modeling the potential role of experience (exploited after buying an insurance contract) on uptake in crop insurance programs.

Details

Agricultural Finance Review, vol. 78 no. 2
Type: Research Article
ISSN: 0002-1466

Keywords

Article
Publication date: 14 December 2017

Harun Bulut

Regional differences in crop insurance uptake have persisted over time. To partly explain this phenomenon, the purpose of this paper is to propose and evaluate a budget constraint…

Abstract

Purpose

Regional differences in crop insurance uptake have persisted over time. To partly explain this phenomenon, the purpose of this paper is to propose and evaluate a budget constraint (heuristic) effect within the standard expected utility theory (EUT) framework through simulation methods.

Design/methodology/approach

Within the EUT framework, a standard simulation model is used to gain insights into farm insurance decisions when a budget constraint is in effect. The budget constraint is modeled as it has been revealed through the data on farmers’ insurance expenditures. In the simulation analysis, certainty equivalent values are used to rank farm options subject to the revealed budget constraint.

Findings

A budget constraint effect within the EUT framework stands out in explaining the observed regional differences. The proposed explanation is consistent with the historical trends on the ratio of crop insurance expenditure to expected crop value, higher premium rates in regions with lower crop insurance uptake, and the limited turnout for the 2014 Farm Bill’s supplemental area-based crop insurance products. Farmers’ crop insurance choices are found to be mostly constrained-optimal.

Originality/value

This appears to be the first study taking the revealed preferences approach to farmers’ crop insurance choices in a simulation analysis. Some policy implications are drawn and future research avenues are suggested. The findings should be of considerable value to policymakers, academics, bankers, and producers in regard to the design and use of risk management tools.

Article
Publication date: 30 June 2020

Kwame Asiam Addey, John Baptist D. Jatoe and George Tsey-Mensah Kwadzo

The aim of this paper is to identify the factors that influence rice farmers' decisions to adopt crop insurance and premium payments (willingness to pay [WTP] amounts). The paper…

Abstract

Purpose

The aim of this paper is to identify the factors that influence rice farmers' decisions to adopt crop insurance and premium payments (willingness to pay [WTP] amounts). The paper also demonstrates the usefulness of the complementary log-log (cloglog) truncated Poisson double-hurdle model as an alternative hurdle model.

Design/methodology/approach

The study first investigated the nature of the dependent variable, which had non-normal residuals and was overdispersed. The probit truncated normal regression double-hurdle model was tried but it failed the normality and homoscedasticity tests; hence, the cloglog truncated Poisson double-hurdle model was employed in the study.

Findings

An estimated 61% of respondents would purchase crop insurance, despite farmers not having prior experience with this product. Amongst others, the factors that influence insurance adoption amongst rice farmers are the share of rice in total income, reliability perception of crop insurance schemes and the probability of failure to achieve target yields. The latter helps the authors to address adverse selection, a central issue to the viability of such an insurance programme. The determinants of farmers' WTP are also identified.

Research limitations/implications

Sampling was limited to farmers using irrigation and living in one region of Ghana, which may limit the study’s wider applicability.

Originality/value

As far as the authors are aware, this study is the first to select the appropriate hurdle model based on established properties of the dependent variable on this topic – crop insurance decisions.

Details

Agricultural Finance Review, vol. 81 no. 1
Type: Research Article
ISSN: 0002-1466

Keywords

Article
Publication date: 10 August 2020

A.G. Adeeth Cariappa, Darshnaben P. Mahida, Priyanka Lal and B.S. Chandel

The purpose of this paper is to identify the correlates of crop insurance adoption and estimate the impact on debt and farm income.

Abstract

Purpose

The purpose of this paper is to identify the correlates of crop insurance adoption and estimate the impact on debt and farm income.

Design/methodology/approach

The authors used nationally representative data from National Sample Survey Office (NSSO), which consisted of 35,200 farming households. Logit and propensity score matching (PSM) (nearest neighbor, caliper and kernel matching) techniques were used.

Findings

With only around 5% of households insuring their crops and 87% of them not receiving claims, crop insurance in India has failed. Logit model estimates of correlates of adoption indicated that households with larger family size, lower social group, less education, lower standard of living and poor were more likely to be left out of the ambit of crop insurance. Further, propensity score estimates suggested that households with access to crop insurance had significantly lesser outstanding debt with positive effect on input costs and crop income. The authors’ results were in contrast to the risk balancing theory.

Practical implications

Results of our work encourage us to rethink and restructure the crop insurance policy design in India. With credit and insurance markets interlinked by design and as the risk balancing in the farm business found absent, policies to strengthen both the markets are the need of the hour. To encourage more farmers to take up crop insurance, revenue-based indemnity calculation could be tried in India.

Originality/value

Impact estimates from three different algorithms of matching were compared and tested for robustness. Consistent average treatment effect on treated (ATT) was considered for interpretation and policy implications. Since the data are from a nationally representative survey, results are believed to be of extreme value to policy makers and insurance providers as it can be generalized.

Details

Agricultural Finance Review, vol. 81 no. 2
Type: Research Article
ISSN: 0002-1466

Keywords

Article
Publication date: 29 July 2019

Joseph A. Adjabui, Peter R. Tozer and David I. Gray

The purpose of this paper is to assess farmers’ willingness to participate and pay for weather-based index insurance in the Upper East Region of Ghana, and what factors influence…

Abstract

Purpose

The purpose of this paper is to assess farmers’ willingness to participate and pay for weather-based index insurance in the Upper East Region of Ghana, and what factors influence the participation and purchase of crop insurance schemes.

Design/methodology/approach

A survey of 200 farmers in the region was carried out in 2018 to measure demographic information, farm characteristics, risks and risk-management practices and attitudes to crop insurance programs. The survey also captured maximum willingness to pay (WTP) for crop insurance. The double-bounded contingent valuation technique was used to estimate the WTP for crop insurance and the variables that affected WTP.

Findings

Farmers, in general, had an indifferent attitude to crop insurance in the region, but were willing to participate in the crop insurance programme, and were willing to pay between 7.5 and 12.5 per cent of the cost of growing maize as a premium for crop insurance. Demographic and economic variables did not impact WTP, but attitude towards crop insurance, farm diversification and frequency of drought negatively impacted on the WTP for crop insurance.

Practical implications

Education programs could be undertaken to improve the attitude and understanding towards crop insurance, as some farmers perceived the programme as not trustworthy, and others did not truly understand the operation of the programme.

Social implications

Drought can have a significant impact on household welfare, particularly in food insecure countries or regions. Crop insurance can provide a method of securing income for farmers allowing them to purchase food rather than other choices, such as removing children from education to reduce household expenses, improving the long-term welfare of the farm household.

Originality/value

This paper considers willingness to participate and WTP for a crop insurance programme in Ghana, it is one of a small number of papers that consider attitude to, and willingness to participate and WTP for crop insurance in developing countries. The value of the research is the expanded understanding of farmer attitude to crop insurance and their lack of knowledge of crop insurance operations.

Details

Agricultural Finance Review, vol. 79 no. 4
Type: Research Article
ISSN: 0002-1466

Keywords

Article
Publication date: 18 March 2020

Harun Bulut

The article examines the impact of policy change on enterprise unit subsidies that took place in 2009 on the quantity demanded for crop insurance.

Abstract

Purpose

The article examines the impact of policy change on enterprise unit subsidies that took place in 2009 on the quantity demanded for crop insurance.

Design/methodology/approach

The analysis covers corn, soybeans, and wheat that are grown in six economic regions and uses various measures of purchasing such as acres insured, unit structure, coverage levels, as well as crop hail use as proxies for the quantity demanded.

The analysis first employs time series econometric tools to analyze whether the time path of the share of enterprise units within buyup acres is influenced by the policy change in enterprise unit subsidies. It then comparatively examines the insurance experience between 2008 (right before the change) and 2015 (well after the change).

Findings

For corn, soybean, and wheat, the analysis establishes that the time path of the share of enterprise units within buyup coverage acres is statistically and economically influenced by the intervention. The analysis further quantifies the intervention's immediate and long-term impacts and finds that farmers' unit choices are highly responsive (elastic) to subsidy rates in those units.

Between 2008 and 2015, the insurance experience generally indicates that the share of enterprise units within buyup coverage surged, the share of acres under catastrophic coverage declined, and the share acres in high coverage levels increased. Meanwhile, growers have increasingly utilized crop-hail policies.

Originality/value

This appears to be the first study (1) quantifying the sensitivity of farmers' unit choices with respect to subsidy rates in those units and finding that such choices are actually highly responsive (elastic), and (2) pointing out the interaction between MPCI and crop-hail products and offering insights as to their combined use. The findings should be of considerable value to policymakers, academics, bankers, and producers in regards to the design and use of risk management tools.

Details

Agricultural Finance Review, vol. 80 no. 4
Type: Research Article
ISSN: 0002-1466

Keywords

Article
Publication date: 28 August 2019

Pankaj Singh and Gaurav Agrawal

The purpose of this paper is to review research on weather index insurance (WII) for mitigating the weather risk in agriculture and to identify research gaps in current available…

Abstract

Purpose

The purpose of this paper is to review research on weather index insurance (WII) for mitigating the weather risk in agriculture and to identify research gaps in current available literature through integrative review.

Design/methodology/approach

This paper is based on the integrative review method as proposed by Whittemore and Knafl. QualSysts tool was adopted for assessing the quality appraisal of articles. Reporting followed the Preferred Reporting Items for Systematic Reviews and Meta-Analyses (PRISMA) guidelines.

Findings

Detailed critical analysis of content reveals that WII studies are growing and shifting from traditional to the newest themes. Efficacy of WII is significantly influenced by the impacts of climate change. This paper generates a conceptual framework by synthesizing the published literature on WII.

Research limitations/implications

This paper will be used to improve the WII practices and influence public policy. It is also beneficial in research by contributing to the systematic body of knowledge and useful for researchers to analyze the past and present status with future prospects of further studies on WII.

Originality/value

The paper is the original work of the author. To the best of authors’ knowledge, this is the first paper on integrative review on the efficacy of WII. An attempt has been made in the current paper to critically examine the studies of WII.

Details

International Journal of Ethics and Systems, vol. 35 no. 4
Type: Research Article
ISSN: 2514-9369

Keywords

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