Purpose
The purpose of this paper is to identify the factors that determine demand for crop insurance in Poland.
Design/methodology/approach
To examine the determinants of decisions regarding crop insurance, the authors used logistic regression. The base source of data for the analysis was the 2013 FADN sample. The scale of yield losses, the indemnities received and the Arrow-Pratt risk aversion coefficient were examined in a representative sample of farms in consecutive years in the period 2004-2013.
Findings
Losses are the major determinants of crop insurance uptake. Additionally, it was observed that the economic determinants are in line with the expected utility theory, while contrary to expectations, farmer’s characteristics such as education level, age or even risk aversion did not prove to have any influence on crop insurance uptake.
Research limitations/implications
The FADN sample is representative as regards the type of farming, economic size of farm and location of the farm. Every farm in the sample represents a specific number of similar farms in the population. However, it must be emphasised that the representativeness of the sample with respect to other determinants, e.g., yield losses in previous years, using crop insurance or the farmers’ age and education has not been verified due to lack of data characterizing the general population with regard to these factors.
Practical implications
It could be argued that the system of crop insurance subsidies should be targeted to encourage the farmers who previously had not used insurance to join the system.
Originality/value
The paper presents the analysis of crop insurance uptake in a country with a strongly polarised agriculture. The Polish farm sector consists of 1.4 million farms with sizes ranging from 1 ha to over a few thousands hectares. The research is based on a data set of 5,202 farms which contains data from ten years (2004-2013). The novelty of the methodological approach is that it includes information on the number of farms represented by every farm in the FADN sample in the Horvitz-Thompson estimator in order to achieve results which are valid for the general population of Polish farms.
Risk aversion is an important research area in the field of agricultural economics in the last years. Creating effective and efficient risk management tools in an increasingly volatile economic and natural environment requires proper recognition of farmers’ behavior and attitudes towards risk. In this context, the main aim of the paper was to estimate farmers’ attitudes towards risk and identification of farm’s and farmer’s characteristics in dependency on risk aversion level. The assessment of farmers’ preferences towards risk was based on hypothetical games in a representative sample of 600 Polish farms—participants of Farm Accountancy Data Network (FADN). Based on the interviews with farmers, a relative risk aversion coefficient has been estimated. Results revealed that on average Polish farmers have quite a strong risk aversion. Their attitudes towards risk are strongly linked with their self-assessment regarding their way of making decisions under risk. Some relations between farmers’ risk aversion and perception of selected risk factors could also be observed. The results revealed that the application of specified risk management tools by farmers and their potential reaction to a significant income drop are related to risk aversion level.
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