We analyse the way French farmers manage production risks, especially the risk of drought. To this end, we assess the role of irrigation in farmers’ risk management. Based on the European Farm Accountancy Data Network data, we jointly estimate farmers attitudes to risk and their production decisions. We correct for sample selection bias and endogeneity. Results of the probit model show that irrigation technology serves as a self-insurance. Results of the joint estimation show that irrigating farmers have higher means but lower variance of profits than non-irrigating farmers. However, for already irrigating farmers, using more water volumes increases the variance of outcome.
The role of irrigation in farmers’ risk management strategies in France
20 February 2015