Income insurance as a tool for the stabilization of farm income: An application in the Spanish olive oil sector

Abstract

This paper analises a set of revenue stabilisation policies for Spanish olive oil growers, including yield and revenue insurance schemes. In theory and under certain assumptions, revenue insurance provides cheaper revenue stabilisation than a combination of price and yield insurance. After reviewing several revenue insurance experiences, an application is developed to compare various policies that include the actual production aid, tree aid, yield insurance and revenue insurance. The comparison is made taking into account the efficacy of public expenditure’s efficiency and the risk reduction potential. Results do not back the assertion that a revenue insurance scheme would be a superior policy than the current policy, that includes a production aid and yield insurance. It is shown that revenue insurance requires less reinsurance protection than yield insurance, making it cheaper on relative terms. Lastly, the analyses at provincial level show that the results of each studied policy are sharply different based on the risks and productivity that characterise each province.