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

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  • Simone Russo

    (Department of Agriculture, Food, Natural Resources and Engineering (DAFNE), University of Foggia, 71122 Foggia, Italy)

  • Francesco Caracciolo

    (Department of Agricultural Sciences, University of Naples, Federico II, 80055 Portici, Italy)

  • Cristina Salvioni

    (Department of Economics, University of Chieti-Pescara, 65127 Pescara, Italy)

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.

Suggested Citation

  • Simone Russo & Francesco Caracciolo & Cristina Salvioni, 2022. "Effects of Insurance Adoption and Risk Aversion on Agricultural Production and Technical Efficiency: A Panel Analysis for Italian Grape Growers," Economies, MDPI, vol. 10(1), pages 1-17, January.
    • Handle: RePEc:gam:jecomi:v:10:y:2022:i:1:p:20-:d:720993
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    References listed on IDEAS

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    1. Bellon, Mauricio R. & Kotu, Bekele Hundie & Azzarri, Carlo & Caracciolo, Francesco, 2020. "To diversify or not to diversify, that is the question. Pursuing agricultural development for smallholder farmers in marginal areas of Ghana," World Development, Elsevier, vol. 125(C).
    2. Chavas, Jean-Paul & Kim, Kwansoo, 2010. "Economies of diversification: A generalization and decomposition of economies of scope," International Journal of Production Economics, Elsevier, vol. 126(2), pages 229-235, August.
    3. Timothy J. Coelli & D.S. Prasada Rao & Christopher J. O’Donnell & George E. Battese, 2005. "An Introduction to Efficiency and Productivity Analysis," Springer Books, Springer, edition 0, number 978-0-387-25895-9, December.
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    Cited by:

    1. Shaolong Zeng & Bingying Qi & Minglin Wang, 2022. "Agricultural Insurance and Agricultural Economic Growth: The Case of Zhejiang Province in China," IJERPH, MDPI, vol. 19(20), pages 1-21, October.

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