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Studying Farm Insurance Demand under Financial Constraints

Author

Listed:
  • Lajos Barath

    (Institute of Economics - Centre for Economic and Regional Studies, Hungarian Academy of Sciences)

  • Raushan Bokusheva

    (ETH Zürich, Agricultural Economics Group)

  • Imre Ferto

    (Institute of Economics - Centre for Economic and Regional Studies, Hungarian Academy of Sciences)

Abstract

We hypothesize a reciprocal causation between crop insurance use and the economic performance of farms in an environment characterized by imperfect financial markets and farms’ budget constraints. To test our hypothesis, we apply a system of simultaneous equations consisting of economic performance and insurance demand models to the case study of Hungarian cropping farms. In addition, considering that insured farms may have better access to external finance, we seek empirical evidence confirming a potential positive effect of crop insurance on the economic performance of financially constrained farms. Our study results indeed confirm the reciprocal causation hypothesis.

Suggested Citation

  • Lajos Barath & Raushan Bokusheva & Imre Ferto, 2016. "Studying Farm Insurance Demand under Financial Constraints," CERS-IE WORKING PAPERS 1625, Institute of Economics, Centre for Economic and Regional Studies.
    • Handle: RePEc:has:discpr:1625
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    References listed on IDEAS

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    More about this item

    Keywords

    crop insurance demand; farm productivity; financial constraints; farm investment; Hungarian agriculture.;
    All these keywords.

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • Q14 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Finance

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