I Learn, You Learn, We Gain. Experience in Crop Insurance Markets

62 Pages Posted: 19 Nov 2018

Date Written: April 26, 2018

Abstract

The relevance and the impact of experience in insurance markets are underinvestigated. From Italian farm-level data we estimate a dynamic discrete choice model of participation to investigate the role of experience. The methodology, coupled with exploratory analysis, allows one to compare how different sources of experience influence the crop insurance decision making process. We found that direct experience is a catalyst for insurance participation of medium and large farms. The experience indirectly acquired is also relevant, especially for small farms. Policy implications are discussed: in particular, we discuss on the importance of information campaigns and of bolstering uptake to exploit the advantages of the inertia and spillover effects that emerge from experience.

Keywords: Direct Experience, Dynamic Probit, Imperfect Knowledge, Indirect Experience, State Dependence

JEL Classification: G22,Q12, Q18

Suggested Citation

Santeramo, Fabio Gaetano, I Learn, You Learn, We Gain. Experience in Crop Insurance Markets (April 26, 2018). Available at SSRN: https://ssrn.com/abstract=3285114 or http://dx.doi.org/10.2139/ssrn.3285114

Fabio Gaetano Santeramo (Contact Author)

University of Foggia ( email )

Largo Papa Giovanni Paolo
Foggia, 71100
Italy

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