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Farmers’ response to risk management tools proposed by the EU Common Agricultural Policy: A behavioural economic approach

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  • Full or part time
    Dr Simone Cerroni
    Dr Emanuela Bozzini
  • Application Deadline
    No more applications being accepted
  • Funded PhD Project (Students Worldwide)
    Funded PhD Project (Students Worldwide)

Project Description

The Common Agricultural Policy 2014–2020 introduced a major change regarding risk management tools that Member States can promote to increase farmers’ resilience (EU, 2016). An innovative risk management tool was implemented, the income stabilization tool (ITS). The ITS is a mutual fund of financial reserves that are accumulated thanks to voluntary contributions of participants and are used to compensate participants for income losses due to production losses and price-related risks (i.e., price volatility) (EU, 2016). The implementation of mutual funds and the IST is very limited. Only two Member States Italy and Hungary and a region is Spain (i.e., Castilla y León) have set up funding for supporting the IST in the period 2014-2020 (EU, 2016).

The implementation of the IST generates significant challenges. Research was conducted on simulating the correct pricing (i.e., the entrance price) and the costs of implementing the scheme (Finger and El Benni, 2014; Fabian et al., 2016; Trestini et al., 2017). However, there is scant research investigating how farmers’ actually behave when they are given the opportunity to join such a scheme. The project will answer the following questions using a behavioral economic perspective:
1. Are farmers willing to cooperate to set a mutual fund for the IST?
2. Which are the attribute of the IST that affect the farmers’ willingness to cooperate
(i.e., entrance price, time-horizon, specification of the income level)?
3. What is the influence of farm characteristics on willingness to cooperate? Does adverse selection play a role?
4. Which behavioural factors affects farmers’ willingness to cooperate (i.e., risk and ambiguity aversion, time preferences, subjective probabilistic beliefs, altruism, etc.)?
5. What are the welfare benefits generated by the IST for the farmer population of interest? Are farmers better-off joining the IST?
These research questions will be answered by collecting primary data using framed field experiments (Harrison and List 2004) in the Province of Trento. Representative populations of apple and dairy farmers will be sampled to participate to the study.

Expected results and impact
Results from this research will help designing the IST that maximizes farmers’ acceptability of the IST as well as welfare benefits generated by the tool. While these results are related to the population of interest, namely apple and dairy farmers in the province of Trento, findings will be relevant at European level. Important lessons can be learned from other region in Italy and other EU member states. While the main simplification is the main goal of the future
CAP for the period 2021-2027, the IST will remain a fundamental part of the policy.

Funding Notes

Funded by the University of Trento and Co.Di.Pr.A. Applications for PhD positions are accepted from applicants, regardless of gender, age and nationality, who hold an Italian “Laurea Magistrale”, according to the DM no. 270 of 22.10.2004 and subsequent amendments, or an equivalent Italian academic degree or an equivalent foreign academic degree (Master’s degree), recognized as equivalent by the Admissions Committee. Applications are also accepted from students expecting to obtain the necessary degree by October 31, 2019.

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