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Abstract
The provision of better risk management tools for farmers and the reduction of adverse effects from pesticide use are both important goals of agricultural policy – but are potentially interrelated and might contradict each other. In this article, we analyze the relation of crop insurance and pesticide use in European agriculture using the examples of France and Switzerland. In our conceptual and empirical framework, we account for the complex structure of insurance uptake, land use and pesticide use decisions of farmers, potentially leading to insurance - pesticide use interactions both at the intensive and extensive margin. Our empirical results indicate a positive and economically significant relation between crop insurance and pesticide use in European agriculture. The findings suggest that without crop insurance, pesticide expenditures would be 6 to 11% lower. However, the importance of extensive and intensive margin relations differs between France and Switzerland and is related to country specific characteristics. We conclude that new risk management instruments should account for potential effects on input use.
Highlights
The current focus of agricultural policy comprises both the reduction of adverse effects from pesticide use on human health and the environment (Skevas et al, 2013; Lefebvre et al, 2015; Möhring et al, 2020), as well as the provision of better risk management instruments for farmers, such as insurances (Meuwissen et al, 2013; El Benni et al, 2016; Bardají et al, 2016)
We first look at descriptive statistics of pesticide use and insurance for France and Switzerland to get an intuition on the insurance-pesticide use relation in France and Switzerland
Note that while the descriptive analysis may provide some basic intuition on the relation between insurance and pesticide use decisions, conclusions are limited in comparison to the regression analysis, as we i) use a binary insurance variable here, ii) do not simultaneously account for extensive and intensive margins, iii) do not control for co-variates and iv) do not account for the decision structure of farmers compared
Summary
The current focus of agricultural policy comprises both the reduction of adverse effects from pesticide use on human health and the environment (Skevas et al, 2013; Lefebvre et al, 2015; Möhring et al, 2020), as well as the provision of better risk management instruments for farmers, such as insurances (Meuwissen et al, 2013; El Benni et al, 2016; Bardají et al, 2016). Effective and efficient policies should account for potential interrelations between the provision of such risk management tools and farmers input use decisions. Given the largescale implementation of insurance schemes, Goodwin and Smith (2013) and Urruty et al (2016) have highlighted the importance of the relation between crop insurance and farmers' input use for both American and European agriculture and underlined the need for more research on this topic. Existing studies in the European context only focus on relations at the intensive margin, i.e. pesticide use per hectare (Chakir and Hardelin, 2014; Aubert and Enjolras, 2014).
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