Crop Insurance and pesticide use in French agriculture: an empirical analysis

This paper investigates the factors affecting the demand for crop–hail insurance and explores the potential relation with pesticide use for a sample of French farmers on the period 1993-2004, for the Meuse department. An econometric model involving two simultaneous equations with mixed censored/continuous dependent variables is estimated. Estimation results show that, in the case of rapeseed, insurance demand is significantly and positively related to pesticide use, but that the magnitude of this interaction is quite small. Insurance demand is positively influenced by the coefficient of variation of yield and the loss ratio, and is negatively influenced by Common Agricultural Policy subsidies and diversification of activity at farm level. These results shed light on the determinants of French farmers’ decisions related to risk management.