Modeling agricultural risk management policies – The implementation of the Income Stabilization Tool in Italy

Severini, Simone; Biagini, Luigi; Finger, Robert

doi:10.1016/j.jpolmod.2018.03.003

Cited by 40 publications

(52 citation statements)

References 16 publications

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“…Existing studies on IST focus on its income-stabilizing effect (i.e. risk reduction), governmental costs, and potential beneficiaries within the farming population (EC, 2009;dell'Aquila and Cimino, 2012;Liesivaara, Myyrä and Jaakkola, 2012;Liesivaara and Myyrä, 2016b;Pigeon, Henry de Frahan and Denuit, 2012;Mary, Santini and Boulanger, 2013;Severini et al, 2018;Trestini et al, 2017 and2018). Moreover, effects on farm income concentration have been provided (e.g.…”

Section: Introductionmentioning

confidence: 99%

“…Yet these studies have not addressed potential interdependencies between IST and direct payments and changes therein. Direct payments also influence income levels, stabilize farm income, and reduce income disparity within the farm population (Enjolras et al, 2014;Severini et al, 2018;Severini et al, 2016a andEl Benni et al, 2012;El Benni et al, 2016) 3 . Thus, the impact of IST could differ under different levels of direct payments.…”

Section: Introductionmentioning

confidence: 99%

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Effects of the Income Stabilization Tool on farm income level, variability and concentration in Italian agriculture

2019

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This paper provides an ex ante assessment of the effects of the Income Stabilization Tool (IST), a new risk management tool proposed in the Common Agricultural Policy of the European Union. We investigate the effects of IST on income variability and levels as well as on income inequality in the farming population. We take Italian agriculture as an example as the introduction of IST is currently under discussion there. A rich panel of 2777 farms was studied over a period of 7 years. We use stochastic simulation to derive different income inequality estimates and apply Gini decomposition approaches to assess the distributional implications of IST. We compare the current income situation with that resulting from a hypothetical implementation of IST under different policy scenarios, also accounting for reduced levels of CAP direct payments. We find that IST not only stabilizes farm income but also enhances its level and reduces income inequality in Italian agriculture. IST is more effective in reducing income inequality when farmers pay contributions to mutual funds that are proportional to their income compared to the case of flat rate contributions. Finally, results do not support the hypothesis that the impact of IST will differ if the level of direct payments were to be reduced. Thus, results seem robust enough to accommodate future policy conditions.

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Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Effects of the Income Stabilization Tool on farm income level, variability and concentration in Italian agriculture

2019

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“…In scientific papers, the issues of integrated risk assessment are verified by empirical research: 1) integrated assessment deals with two types of risk (market and credit risks) in the banking sector (Tanaka & Muromachi, 2003;Iscoe, Kreinin & Rosen, 1999;Medova & Smith, 2005;Dimakos et al, 2004), and, due to the specific features of this sector, the research results can be useful for the banking sector only; 2) integrated assessment aims at measuring factors of one risk type arising from different sources (Greiving et al, 2006;Bechmann, 2009;Zhang et al, 2016;Botti et al, 2018;Iqbal et al, 2018;Severini et al, 2019), and the application of integrated assessment is limited to natural risks; 3) integrated assessment aims at determining the threats posed by natural hazard (Johnson, 2019;Wang et al, 2018;Lescesen et al, 2019;Wenda-Piesik et al, 2016;Achieng Onyango et al, 2016, Jia et al, 2016Naulin, 2015;Zhang et al, 2017;Wang et al, 2018), and application of integrated assessment is limited to production sector; 4) integrated assessment aims at evaluating optimization of project portfolio, which includes social, economic and environmental factors (Costa Dutra et al, 2016).…”

Section: Literature Reviewmentioning

confidence: 97%

Integrated Risk Assessment: Case Study of Lithuanian Family Farms

Vaitkevičius

Aleknevičienė

Girdžiūtė

et al. 2019

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This study is designed to develop the tool for risk assessment under the integrated approach. Analyzing risk several problems are encountered: the first one arises at the farm level – assessment of risk in the whole-farm context rather than in a partial context, i.e. an integrated risk assessment tool is necessary. The second problem is related to the dynamic aspect when determining how the risk changes over time and what the main drivers of these changes are. All these problems are solved in the presented research, creating an integrated risk assessment index (IRAI) and testing it in Lithuanian family farms. This index assesses four types of risk: economic, financial, production, and political. The research methodology is developed to make sure that the data collected on the IRAI behavior is as diverse as possible. A model of IRAI variation by farm size illustrating risk evolution at the Lithuanian farms and, at the same time, enabling visual diversification of the dependence of integrated risk on farm size is developed. Hierarchical cluster analysis is applied for identification of the integrated risk evolution models. Assessment of the interaction between the IRAIand output and input using nonparametric Kruskal-Wallis testis used to find out whether the type of integrated risk is based on differential logic. IRAI was tested using official statistical data of 1300 family farms collected in 2004–2013 for institutional purposes. The testing revealed that the designed IRAI allows identifying types of farms by their risk evolvement profiles and the key risk (s) acting on the farm in the historical period. Four meaningful clusters representing the changing pattern of the risk are identified during the testing of IRAI: increasing risk farms; reducing risk farms; relatively constant risk farms; varying risk farms. IRAI can be applied both for macro analysis (at a national, EU or other levels) and microanalysis (at the level of a single farm).

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“…The Direct Payments serve also as an income stabilization tool [39], whose rationale is based on a fact, that farmers are subjected to various types of risks (flooding, drought, frosts, agricultural pests and etc.) that are far beyond control and can severely affect farmers income, even leading to insolvency.…”

Section: The Deficiencies Of Current Direct Payments Financial Mechanismmentioning

confidence: 99%

In a Search for Equity: Do Direct Payments under the Common Agricultural Policy Induce Convergence in the European Union?

et al. 2019

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The European Union (EU) is an integrated alliance of equally treated Member States sharing mutual values, legal principles and markets. Close cooperation, deep integration and convergence are the major priorities for the EU. Anyway, these principles are not always reflected in the EU-wide policies which are implemented through financial support mechanisms. The direct payments financial support mechanism under the Common Agricultural Policy, the main instrument for promoting convergence in development of Member States’ agricultural sectors and rural sustainability, faces critique for failing to meet its objectives. One of the major deficiencies of the direct payments scheme is that it allocates more resources to already developed agricultural sectors of the older Member States and less resources to developing ones thus increasing the divergence among the Member States. The aim of this paper is to suggest new mechanisms for direct payment funds redistribution across the EU Member States which are based on the methodological principles that would more precisely correspond to the aims of convergence, transparency and fair redistribution. The results show that, regardless of the method chosen (to support more or less effective agricultural sectors of EU Member States), the proposed methodology lowers differences in direct payment rates among the EU Member States by two-fold. This ensures correspondence to the goal of convergence within the EU.

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Modeling agricultural risk management policies – The implementation of the Income Stabilization Tool in Italy

Cited by 40 publications

References 16 publications

Effects of the Income Stabilization Tool on farm income level, variability and concentration in Italian agriculture

Effects of the Income Stabilization Tool on farm income level, variability and concentration in Italian agriculture

Integrated Risk Assessment: Case Study of Lithuanian Family Farms

In a Search for Equity: Do Direct Payments under the Common Agricultural Policy Induce Convergence in the European Union?

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