Crop Insurance Subsidies and Environmental Externalities: Evidence from Southern Italy

Abstract

Rapid environmental changes can affect agriculture by introducing additional sources of uncertainty.Conversely, policy interventions to help farmers cope with risks may have strong impacts on the environment. In this paper, we evaluate the effects of public risk management programmes, particularly subsidies on crop insurance, on fertilizer use and land allocation. We implement a mathematical programming model based on data collected from 1,092 farms in Puglia, a southern Italy region. The results show that under the current crop insurance programmes, input use is expected to increase, while the effect on production is likely to be crop-specific. The policy and environmental implications are discussed.

Inhibition or Promotion?–The Effect of Agricultural Insurance on Agricultural Green Development

“…Although the coefficient is very small, agricultural insurance has an inhibitory effect on agricultural green development. Our research results are similar to that of Horowitz and other scholars (11,(36)(37)(38)(39)(40)(41)(42)66). In their research, they found that there is a positive correlation between agricultural insurance and chemical input.…”

“…It was found that insured fruit farmers spent more on the use of chemical fertilizers and pesticides than uninsured fruit farmers. Capitanio et al (41) studied the impact of insurance subsidy scheme for fertilizer used and planting proportion distribution and found that crop insurance usually has a positive impact on the optimal amount of nitrogen fertilizer for wheat and tomato. However, the research conducted by Wong et al ( 42) on a drought-prone area in northern Ethiopia found that insurance-voucher programmed at best produced weak effects on stimulating agricultural activities in the immediate term.…”

Fiscal Policy Dilemma in Resolving Agricultural Risks: Evidence from China’s Agricultural Insurance Subsidy Pilot

“…By analyzing the environmental effects of AISP, the conclusions drawn in this paper are the same as Capitanio [ 21 ]. The government helps farmers mitigate production risks through subsidy policy, which indirectly leads to extensive production and environmental pollution.…”

“…First, financial subsidies encourage farmers to produce in high-risk areas, which will cause damage to the ecological environment. Capitanio [ 21 ] conducted an empirical study on the environmental effects of crop insurance subsidies, which was based on the data of 1092 farms in Puglia, southern Italy. The author believes that policy interventions to help farmers cope with risks may have adverse effects on the environment.…”