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Determinants of Farmers’ Participation in the Production Insurance System

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  • Rawa Grzegorz

    (Warsaw University of Life Sciences, Faculty of Economics; ul. Nowoursynowska 166, 02-787 Warsaw, Poland)

Abstract

Progressive climate change triggers off phenomena that threaten agricultural production. Crop insurance makes it possible to mitigate their effects, but only a small percentage of crops in Poland is insured. Previous research into the determinants of farmers'participation in the production insurance system has mainly used the logit regression method. This paper presents the results of a study using a structural equation model (SEM) estimated for a sample of 600 farms in the FADN observation field, which aimed to identify factors influencing farmers’ purchase of production insurance. This research approach made it possible to describe the phenomenon in a way that has been little recognized so far, complementing the decision-making model under consideration with latent variables that could not be considered by the methods used so far. Based on the literature research, three unobservable variables were identified: willingness to purchase insurance, risk aversion and risk perception, and farming intensity, and then quantified using observable variables. The results show a directly proportional relationship between willingness to purchase insurance and risk aversion and risk perception and inversely proportional relationship with farming intensity.

Suggested Citation

  • Rawa Grzegorz, 2023. "Determinants of Farmers’ Participation in the Production Insurance System," Zagadnienia Ekonomiki Rolnej / Problems of Agricultural Economics, Sciendo, vol. 375(2), pages 51-67, June.
    • Handle: RePEc:vrs:zerpae:v:375:y:2023:i:2:p:51-67:n:2
    DOI: 10.30858/zer/166603
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    More about this item

    Keywords

    structural equation models (SEM); agricultural production insurance; agricultural sector;
    All these keywords.

    JEL classification:

    • A12 - General Economics and Teaching - - General Economics - - - Relation of Economics to Other Disciplines
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies

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