Crop Insurance as a Strategy to Adapt to Climate Change

Salvatore Di Falco, Felice Adinolfi, Martina Bozzola, Fabian Capitanio

Research output: Contribution to journalArticle

66 Citations (Scopus)

Abstract

Financial insurance for extreme events can play an important role in hedging against the implications of climate change. This paper combines a comprehensive estimation strategy and a unique panel dataset to study the role of financial insurance in farmers' welfare under uncertainty. Data are drawn from a large Italian farm panel dataset. We find that (i) demand for insurance products is likely to increase in response to climatic conditions, and (ii) that the use of insurance reduces the extent of risk exposure. We also find that farms growing more crops are less likely to adopt the insurance scheme. This confirms what is found in the theoretical literature. Crop diversification can be a substitute for financial insurance in hedging against the impact of risk exposure on welfare.
Original languageEnglish
Pages (from-to)485-504
JournalJournal of Agricultural Economics
Volume65
Issue number2
Early online date04 Mar 2014
DOIs
Publication statusPublished - Jun 2014

Keywords

  • Adaptation
  • climate change
  • crop diversification
  • insurance
  • panel data

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