Revealing the Willingness to Pay for Income Insurance in Agriculture

32 Pages Posted: 4 Sep 2015

See all articles by Carlos Pérez-Blanco

Carlos Pérez-Blanco

Fondazione Eni Enrico Mattei (FEEM), Venice

Carlos Gomez

Universidad de Alcalá

Multiple version iconThere are 2 versions of this paper

Date Written: July 2015

Abstract

A stable agricultural income is often regarded as a way to achieve a better environmental performance in this sector. However, conventional income stabilization tools have been showing recently signs of exhaustion. Under this critical juncture, EU institutions have encouraged the expansion of agricultural insurance. With different degrees of public support, insurance systems against several risks have been successfully developed across the EU and have adopted increasingly comprehensive forms. Eventually, EU institutions have started to assess the development of a comprehensive income insurance framework. Income insurance covers a wider variety of risks and has higher costs than conventional single risk or combined insurance. This demands an in depth knowledge of farmers’ Willingness To Pay (WTP) for this product. The following pages present a methodology that calculates the WTP for different degrees of income protection using a Revealed Preferences Model and the Certainty Equivalent theory. The methodology is applied in a drought prone area in southeastern Spain. Results show that WTP for income insurance in this area is higher than observed insurance premiums. This may play in favor of the development of sustainable income insurance systems, though additional evidence is required.

Keywords: Insurance, income, agriculture, Certainty Equivalent, Revealed Preference Models.

JEL Classification: Q14, Q17, Q18, Q20.

Suggested Citation

Pérez-Blanco, Carlos and Gomez, Carlos, Revealing the Willingness to Pay for Income Insurance in Agriculture (July 2015). CMCC Research Paper No. 259, Available at SSRN: https://ssrn.com/abstract=2655665 or http://dx.doi.org/10.2139/ssrn.2655665

Carlos Pérez-Blanco (Contact Author)

Fondazione Eni Enrico Mattei (FEEM), Venice ( email )

Campo S. M. Formosa, Castello 5252
Venezia, 30122
Italy

Carlos Gomez

Universidad de Alcalá ( email )

Madrid, Alcala de Henares 28801
Spain
+ 34 91 885 42 84 (Phone)
+ 34 91 885 42 39 (Fax)

HOME PAGE: http://www2.uah.es/econ

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