A Note on the Effects of the Income Stabilisation Tool on Income Inequality in Agriculture

Abstract

Increasing concerns with income risks in agriculture have led to discussions on the introduction of an Income Stabilisation Tool (IST) in Europe. In this note, we extend existing evaluations of the IST by investigating the potential effect of the IST on inequality in farm incomes using Swiss agriculture as a case study. We find that the IST will significantly reduce income inequality, in particular by increasing lower quantiles of the income distribution. This property constitutes a value-added of the IST that is not yet considered in the current policy debate.

Agricultural insurance policies in Spain and the EU: an analysis of existent and new risk management tools focusing on indirect risk assessment, and asymmetric information

“…This result is in agreement with previous studies on the potential effects of income stabilization tools on income stability in the sense that it contributes to decreasing income variability (Finger and El Benni, 2014;Mary et al 2013). Mary et al (2013) evaluated the potential implementation of the IST introduced by the CAP 2014-2020 using a farm household model calibrated to French cereal farms and found a high efficiency of the tool, being the decrease in income coefficient of variation of more than 35 %.…”

Agricultural Cooperative Management and Policy

“…In 2009, however, twice as many farmers would have received indemnity payments which also increase the average indemnification to between 2,477 and 3,581 CHF per farm. 13 In general, these levels of indemnification are in line with other research on IST in Swiss agriculture (El Benni 2012;Finger and El Benni 2014).…”

Farmer Participation, Entry and Exit Decisions in the Italian Crop Insurance Programme

“…The IST is aimed at supporting income risk management for agricultural enterprises through the use of mutual funds. Although such a programme could potentially create an effective safety net for farmers and ‘ lower income inequality […] by increasing lower quantiles of the income distribution ’ (Finger and El Benni, ), it has not yet been implemented. Our analysis, limited to the period 2004–2007, cannot provide specific insights on the potential effects of the IST.…”

“….] by increasing lower quantiles of the income distribution' (Finger and El Benni, 2014), it has not yet been implemented. Our analysis, limited to the period 2004-2007, cannot provide specific insights on the potential effects of the IST.…”