Post-adversities recovery and profitability: The case of Italian farmers

Abstract

Insurance represents one of the main instruments, together with other risk management mechanisms, to face the adverse effects produced by natural calamity that, despite their growing intensity and the enormous costs, are still perceived as “exceptional”. Risk management is an important part of farming, and it is a concern for those governments which aim at achieving their agricultural policy targets. In this context, crop insurance can also represent a financial mitigation tool for farmers to face climate change consequences. This study is focused on the Italian case analyzing the evolution of public support and its effect on risk management policy in agriculture. Our research, based on panel data regressions, provides two different levels of analysis. The first one evaluates how the reimbursed value issued by insurance companies in favor of agricultural firms, as recovery from natural adversities, affects farmers’ profitability. The second one evaluates how the reimbursed value is used in farm management. The results of the analysis demonstrating the significance of insurance variables and their positive effect on the profitability of the farms, represent a strong advance in the farm risk management field.