Factors influencing the simultaneous adoption of risk management instruments in Mediterranean irrigated agriculture

Abstract

Agriculture is highly impacted by different sources of risk. There is a wide variety of management instruments that farmers can use to cover these risks. The objective of this article is to analyze the explanatory variables for the simultaneous adoption of a large set of risk management instruments. The main innovation is the methodological approach: first, we apply a hierarchical cluster analysis to identify the groups of instruments whose adoption is correlated; second, we use multivariate probit (MVP) models to analyze the influence of different factors on the simultaneous adoption of the instruments included in each cluster. The explanatory variables capture farmers’ socio-demographic features, risk aversion and subjective perception of past risk experience; farms’ technical-economic characteristics; and local-level climate change. The results reveal significant differences in the variables influencing the adoption of the risk management instruments. The findings can support farmers, risk management service providers, and policymakers.

Keywords:

• adoption decisions
• cluster analysis
• multivariate probit
• risk perception
• risk preferences

Acknowledgments

The authors are particularly grateful to the four anonymous reviewers for their very helpful comments on previous versions of the article.

Disclosure statement

No potential conflict of interest was reported by the authors.

Additional information

Funding

This work was supported by the Andalusian Department of Economy and Knowledge and the European Regional Development Fund (ERDF) [Grant UCO-1264548] (research project FINAGUA).