Crowding out agricultural insurance and the subsidy system in Italy: empirical evidence of the charity hazard phenomenon

Pier Paolo Miglietta, Donatella Porrini, Giulio Fusco and Fabian Capitanio

Agricultural Finance Review, 2020, vol. 81, issue 2, 237-249

Abstract: Purpose - The term “charity hazard” refers to the issue of the crowding out of insurance by co-existing relief programs in the context of different institutional governmental disaster schemes. In this context, the aim of this paper is to verify if the charity hazard phenomenon exists in the Italian agricultural insurance scheme. Design/methodology/approach - Annual data regarding crop insurance, subsidies and farm structure were extracted from ISMEA, ISTAT and FADN databases. A SYS-GMM dynamic panel model was estimated, considering the 2010–2017 time period and the Italian Regions as units of the analysis. Findings - The empirical results highlight a negative relation between crop subsidies and the farmers' policies and total premium paid. The disincentive and crowd-out effects of public aid and subsidies on the choice of whether or not to take out an agricultural insurance policy ends up being one of the key factors for the low level of penetration of the agricultural insurance in Italy. Practical implications - Since the diffusion of agricultural insurance can contribute to the general objective of sustainability and resilience, the implementation of alternative solutions to subsidies could be needed (e.g. the introduction of mandatory insurance against adversities or financial support for a geographically specific insurance tool). Originality/value - Investigating empirically the determinants of the agricultural insurance policy diffusion among the Italian Regions, this study ensures an original contribution to the scientific progress in the field, demonstrating the existence of charity hazard caused by the public subsidies provision.

Keywords: Crop insurance; Charity hazard; Public subsidies; Italy; G22; Q14; Q18; R28 (search for similar items in EconPapers)
Date: 2020
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eme:afrpps:afr-04-2020-0061

DOI: 10.1108/AFR-04-2020-0061

Access Statistics for this article

Agricultural Finance Review is currently edited by Valentina Hartarska and Denis Nadolnyak

More articles in Agricultural Finance Review from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().