Farmers' participation in the Income Stabilisation Tool: Evidence from the apple sector in Italy

Abstract

The Income Stabilisation Tool (IST), which was recently added to the European Common Agricultural Policy's risk management toolkit, is a mutual fund that aims at stabilising farmers' income. We investigate the drivers of farmers' participation in an IST for the apple sector in the Autonomous Province of Trento in Italy, which is the only region that has operationalised the IST in the European Union. Our analysis is based on a theoretical framework based on the Unified Theory of Use and Acceptance of Technology. Using a three-year panel dataset of 3268 farm households, we estimated a logit model with the Mundlak–Chamberlain procedure. Our results show that higher crop production specialisation, associated with greater risk exposure, favours participation in the IST. Similarly, previous experience with mutual funds increases the acceptance of the IST. The analysis also provides evidence of how the new tool interacts with existing on-farm protection strategies, leading to a discussion of the presence of adverse and advantageous selection effects. Our paper sheds light on farmers' acceptance of newly implemented sector-specific ISTs and generates better knowledge and understanding of lock-ins and levers that influence participation in such schemes, which are relevant to other EU regions or member states that are considering the introduction of ISTs.