Modeling agricultural risk management policies – The implementation of the Income Stabilization Tool in Italy

Simone Severini, Luigi Biagini and Robert Finger

Journal of Policy Modeling, 2019, vol. 41, issue 1, 140-155

Abstract: This paper investigates the potential impact of the income stabilisation tool (IST), currently introduced in the European Common Agricultural Policy to reduce farmers’ income risks using Italian agriculture as case study. The paper extends the existing literature by investigating the effects of two implementation issues: level of aggregation of mutual funds (MF); definition of farmers’ contribution (i.e. premium) to MF. We use a simulation approach based on a FADN panel data set of 3421 farms over a period of 7years to investigate effects on (i) farm-level income variability, (ii) the expected level and variability of indemnifications at the level of mutual funds and (iii) the distribution of net benefits from this policy instrument across the farm population. We find that the introduction of the IST would lead to a significant reduction of income variability in Italian agriculture. Our results support the establishment of a national mutual fund due to the high volatility of indemnification levels at more disaggregated (e.g. regional or sectoral) levels. In addition, our results propose that farmers’ contribution to mutual funds, i.e. premiums paid, should be modulated according to farm size as this reduces the inequality of the distribution of benefits of such tool within the farm population.

Keywords: Income stabilisation tool; Policy implementation; Mutual funds; Risk-management policies (search for similar items in EconPapers)
JEL-codes: D63 D8 G22 Q12 Q18 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (20)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jpolmo:v:41:y:2019:i:1:p:140-155

DOI: 10.1016/j.jpolmod.2018.03.003

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