Agricultural insurance-agricultural productivity nexus: Evidence from international data
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Agricultural Insurance-Agricultural Productivity Nexus: Evidence from International Data
Ezdini Sihem
Received: 5 July 2017 / Accepted: 23 August 2017 / Published: 31 December 2017 © The Society of Service Science and Springer 2017
ABSTRACT This article examines the relationship between the development of the agricultural insurance market (using the penetration measure) and the agricultural productivity growth in the context of various factors potentially influencing such relationships. We employ a panel data static model for 23 countries in two continents during the 2000-2015 period. Our main finding is that the development of agricultural insurance market has a positive effect on agricultural productivity growth. Moreover, we show that the conditional variables of a high level of agricultural insurance market penetration, a high level of agriculture credit, a high level of farmers’ education, and a moderated level of agricultural risk management (a low level of expost compensation supplied by the governments in case of catastrophic risks) alleviate the positive impacts of the development of the agricultural insurance market on agricultural productivity growth. By contrast, the conditional variables of a low level of natural risks (drought, floods, and extreme temperatures) and a low level of yield risks strengthen the positive impacts of the development of the agricultural insurance market on agricultural productivity growth. KEYWORDS Agricultural finance, Climate, natural disasters and their management, Total factor productivity, Panel data. Ezdini Sihem ( ) Faculty of Economics and Management, University of Sousse, Tunisia e-mail: [email protected]
148 Ezdini Sihem
1. INTRODUCTION Insurance market activity may contribute to economic growth, both as a financial intermediary and as a provider of risk transfer and indemnification. This is possible by allowing different risks to be managed more efficiently and by mobilizing domestic savings. Therefore, one may raise the question of the impact that faster growth in insurance activity would have on economic growth. The papers in which the development of the insurance market and its relations with the real economy are investigated empirically can be divided into two main areas: The most ones which identified positive relationship between the development of insurance sector and economic growth (their literature review can be found in e.g. Webb et al. 2002; Han et al. 2010; Chen et al. 2013; Marco 2008), and some ones which verified no relations between the development of the insurance market and economic growth (their literature review can be found in Ward and Zurbruegg 2000). The relationship between insurance activities and economic growth has been a popular issue of debate in the field of insurance, whereas no consensus has been yet emerged. So far, most empirical studies have assessed the impact of life insurance on economic growth. However, a few of studies have been interested in the analysis of the impact of nonlife insurance development on economic
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