Effects of Insurance Adoption and Risk Aversion on Agricultural Production and Technical Efficiency: A Panel Analysis for Italian Grape Growers

Simone Russo, Francesco Caracciolo and Cristina Salvioni
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Simone Russo: Department of Agriculture, Food, Natural Resources and Engineering (DAFNE), University of Foggia, 71122 Foggia, Italy

Economies, 2022, vol. 10, issue 1, 1-17

Abstract: This article aims to evaluate the effect of insurance on production, technical efficiency, and input use of Italian specialised-quality grape growers. A panel instrumental variable stochastic frontier approach is applied over the years 2008–2017 using data from the Farm Accountancy Data Network. The results show the requirement to correct for the endogeneity that stems from insurance adoption. Insurance has an enhancing effect on production and efficiency and reduces the use of intermediate inputs. It suggests that insurance helps to diminish the risk-averse farmers’ suboptimal input use due to the presence of uncertainty. Crop insurance leads risk-averse farmers to behave as if they were risk neutral and employs the profit-maximising input vector. Therefore, by reducing the risks linked to the uncertainty of outcomes, crop insurance leads grape growers to go in the direction of profit maximisation.

Keywords: endogenous stochastic frontier; crop insurance; viticulture (search for similar items in EconPapers)
JEL-codes: E F I J O Q (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (1)

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