On insurance to extreme events and farmers welfare: Panel data evidence from Italy

Abstract

This paper aim to understand the viability of the insurance schemes via estimating both the underlying factors that determine farmers decision to adopt an insurance scheme against extreme events and the implications in terms of welfare. It uses a very rich farm level panel data from Italy. We have access to information regarding more than 8500 farms followed for 4 years and adopt a comprehensive estimating strategy that controls for the potential endogeneity of the insurance variable. The econometric results show that the insurance is positively correlated with welfare (captured by farm revenues). We also find that farms that have more crop diversification are more likely to adopt the insurance scheme. This may indicate that crop diversification may act as complement for financial insurance and not as substitute.