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Article
Publication date: 3 April 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

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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)…

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

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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. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0002-1466

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Article
Publication date: 7 September 2015

Jennifer E Ifft, Todd Kuethe and Mitch Morehart

– The purpose of this paper is to consider how the federal crop insurance (FCI) program influences farm debt use, one of the key financial decisions made by farm operators.

Abstract

Purpose

The purpose of this paper is to consider how the federal crop insurance (FCI) program influences farm debt use, one of the key financial decisions made by farm operators.

Design/methodology/approach

Using data from the nationally representative Agricultural Resource Management Survey, the paper implements a propensity score matching model of the impact of FCI participation on various measures of farm business debt use. To account for the simultaneity of financial decisions, the paper further tests this relationship using a seemingly unrelated regression model.

Findings

FCI participation is associated with an increase in use of short-term farm debt, but not long-term debt, consistent with risk balancing behavior and current trends in the farm sector.

Research limitations/implications

In addition to risk balancing, the results are also consistent with credit constraints or lender preferences. The paper cannot fully establish causality between crop insurance participation and short-term debt levels. Future research should address these limitations.

Practical implications

Agricultural lending standards are generally conservative and the farm sector as a whole currently has historically low leverage, which implies that an increase in debt use may not be a threat to the financial health of the farm sector.

Social implications

The results indicate that the reduction in total risk facing the farm sector is significantly less than the decline in risk provided by FCI, which is an important consideration for policymakers.

Originality/value

This is the first paper to use an econometric model to analyze the relationship between FCI and farm debt use decisions. This paper can inform future research on the FCI program and farm financial decisions.

Details

Agricultural Finance Review, vol. 75 no. 3
Type: Research Article
ISSN: 0002-1466

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Article
Publication date: 8 May 2009

Calum G. Turvey

This paper aims to provide a “biography” of sorts on Agricultural Finance Review. The paper tracks the evolution of Agricultural Finance Review from its introduction in…

Abstract

Purpose

This paper aims to provide a “biography” of sorts on Agricultural Finance Review. The paper tracks the evolution of Agricultural Finance Review from its introduction in 1938 to its current status.

Design/methodology/approach

The paper is based on a complete review of every paper and every issue. Not all papers were read by the author, but key papers of interest that in one way or another made significant contributions to the study of agricultural finance were reviewed.

Findings

The paper shows the evolution of agricultural finance from the early days of reporting financial data in the 1930s and 1940s, to its emergence as a major and significant sub discipline of the general field of agricultural economics.

Research limitations/implications

As indicated, not all papers were fully reviewed or read. It is possible that papers identified as “firsts” may have been preceded by other papers. Nonetheless the paper identifies the basic evolutionary path of the journal and defines key points in time when a paradigm shift emerged to change the direction of this discipline.

Practical implications

As Agricultural Finance Review transitions from the Department of Applied Economics and Management at Cornell University to Emerald Group Publishing Limited, this “biography” provides readers with a general overview of the journal's and the discipline's historical development.

Originality/value

This paper is simply a review of the existing literature found in Agricultural Finance Review.

Details

Agricultural Finance Review, vol. 69 no. 1
Type: Research Article
ISSN: 0002-1466

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Article
Publication date: 6 February 2017

Kaiyu Lyu and Thomas J. Barré

The purpose of this paper is to contribute to the aforementioned literature on the linkage between economic activity and human preference by estimating the cross-sectional…

Abstract

Purpose

The purpose of this paper is to contribute to the aforementioned literature on the linkage between economic activity and human preference by estimating the cross-sectional determinants of farmers’ participation in participation in crop insurance programs (CIPs) and identifying the impediments preventing the remaining farmers from participating.

Design/methodology/approach

Using the unique data sets of risk preference experiments and maize producer surveys pertaining to the maize production areas of China, this paper explores the determinants of farmers’ CIPs and scrutinizes the role of risk aversion in farmers’ CIP purchase decisions under the expected utility maximization framework. And a “non-zero threshold probit model” is used for the analysis.

Findings

The results show that risk aversion plays an important role in CIP purchase decision-making, not only in the form of its direct effect but also with regard to the interaction term and expected loss. Furthermore, if the insured amount is high enough, then risk aversion will no longer affect insurance purchase. Additionally, purchase experience, CIP environment (village purchase ratio), and contract items (insured amounts) are significant determinates in these decisions. There is no significant evidence to suggest that serious adverse selection exists in the sampling areas.

Originality/value

One theoretical model is established which considered not only general variables like farmers’ production and household information, but also conditions and terms in the insurance policies. The unique experimental method is used to measure farmers’ risk aversion. Both the role of risk aversion and its’ interaction terms with others in CIP participation are scrutinized to identify complicated influences under the context of real society.

Details

China Agricultural Economic Review, vol. 9 no. 1
Type: Research Article
ISSN: 1756-137X

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Article
Publication date: 1 November 2003

Ashok K. Mishra and Barry K. Goodwin

This research examines factors influencing the adoption of crop and revenue insurance. This is accomplished by estimating a multinomial logit model of insurance choices…

Abstract

This research examines factors influencing the adoption of crop and revenue insurance. This is accomplished by estimating a multinomial logit model of insurance choices facing U.S. farmers. Results indicate significant differences in the probabilities of adoption of each insurance plan. The levels of selected explanatory variables, such as operator’s education level, debt‐to‐asset ratio, off‐farm income, soil productivity, participation in production and marketing contracts, and type of farm ownership, appear to be the determinants of the probability of having adopted each insurance plan.

Details

Agricultural Finance Review, vol. 63 no. 2
Type: Research Article
ISSN: 0002-1466

Keywords

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Article
Publication date: 26 August 2014

Marianne Lefebvre, Dimitre Nikolov, Sergio Gomez-y-Paloma and Minka Chopeva

The purpose of this paper is to analyze the determinants of agricultural insurance adoption in Bulgaria, using a purpose-built survey of 224 farmers interviewed in 2011…

Abstract

Purpose

The purpose of this paper is to analyze the determinants of agricultural insurance adoption in Bulgaria, using a purpose-built survey of 224 farmers interviewed in 2011. The insurance decision is analyzed conjointly with other risk management decisions on the farm such as having contracts with retailers or processors, diversifying farm activities and using irrigation.

Design/methodology/approach

The agricultural insurance sector in Bulgaria is presented in the broader context of the transition to a market-oriented economy and integration of Bulgarian agriculture into the EU Common Agricultural Policy. The recent developments on the determinants of farm insurance adoption in the agricultural economics and finance literature are discussed. A multivariate probit model is used in order to determine the factors explaining the adoption or non-adoption of various risk management tools by the surveyed farmers, including farm insurance.

Findings

The authors find that farmers with diversified activities, using irrigation or having contracts with retailers or processors, are more likely to adopt insurance, after controlling for farms and farmers’ structural characteristics. Additionally, the authors find that the main characteristics distinguishing farmers who purchase agricultural insurance from non-users are farm size and farm location. The existence of strong regional effect suggests the importance of adapting the insurance products to the different regional contexts in Bulgaria.

Originality/value

This paper contributes to the (limited) literature on agricultural insurance adoption in transition countries, currently shifting from a system where compensation against natural hazards tended to come from a State damage mitigation fund, inherited from the centrally planned governments to private and voluntary agricultural insurance. This research provides a unique data source on the Bulgarian case study.

Details

Agricultural Finance Review, vol. 74 no. 3
Type: Research Article
ISSN: 0002-1466

Keywords

Content available
Article
Publication date: 4 May 2020

Marcelo José Carrer, Rodrigo Lanna Franco da Silveira, Marcela de Mello Brandão Vinholis and Hildo Meirelles De Souza Filho

The purpose of this study is to investigate the determinants of agricultural insurance adoption by farmers of the state of São Paulo, Brazil.

Abstract

Purpose

The purpose of this study is to investigate the determinants of agricultural insurance adoption by farmers of the state of São Paulo, Brazil.

Design/methodology/approach

Primary data from the 2015/2016 crop season was collected from a sample of 175 farmers. Logit econometric models were applied to identify the variables that affect the probability of agricultural insurance adoption.

Findings

The empirical results show that the education level, access to technical assistance, use of management tools and farm size positively affect the probability of adopting agricultural insurance. In addition, farmers who produce soybean and/or corn are more likely to use insurance. On the other hand, the higher the farmers’ propensity to take risk the lower the likelihood of using insurance.

Research limitations/implications

The empirical analysis is based on cross-sectional data of a sample of 175 farmers of the state of São Paulo. The use of panel data with a larger sample of farmers, considering a period of years, could provide additional information.

Originality/value

To the best of the knowledge, this is the first empirical analysis about determinants of agricultural insurance adoption by Brazilian farmers, considering behavioral factors. The findings provide useful insights for policymakers in formulating risk management programs in the Brazilian agricultural markets. A better understanding about the determinants of insurance adoption is also relevant for private companies that sell insurance to farmers. Therefore, the paper may contribute with the diffusion of rural insurance as risk management tool in Brazilian agriculture.

Details

RAUSP Management Journal, vol. 55 no. 4
Type: Research Article
ISSN: 2531-0488

Keywords

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Article
Publication date: 3 April 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…

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

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