An econometric approach to factors affecting crop insurance in Romania

Abstract

Crop insurance is a very well implemented mechanism in the economic and agricultural sectors of the developed countries. In the developing countries there are yet in practice traditional local systems of helping the other in the case of natural disasters. The transition to an organized system, based on buying insurance policies, is a very slow process and is, for the moment, used and accepted only by big land owners. The study based on a sample of 308 small farmers in Romania analyzes the factors influencing the decision of buying an insurance policy: age, education, size of the village, the proximity to a city, the type of culture, etc. The sampling method aimed at ensuring representativity on several levels: regional – villages from different counties; education – different levels of education for farmers and different fields of study; type of village – villages of different sizes and situated at various distances from towns; type of crop – farmers that mainly deal with vegetables, pomiculture, vine and field crops. Through two econometric models, Ordered Logit and Binary Logit, both the decision of buying an insurance policy and the type of insurance chosen (partial or full) are assessed. Results show a higher propensity towards using the insurance system in the case of younger farmers who have had access to tertiary education (especially in the field of economics and business), who live in big villages near important cities and who cultivate vegetables. Even though the study is regional, the emphasized mechanisms are universally valid and can be used by policymakers from developing economies.