Factors explaining the adoption of risk management instruments in mediterranean irrigated agriculture

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 paper 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 models to analyze the influence of different factors on the simultaneous adoption of the instruments included in each cluster. Explanatory variables capture farmers’ socio-demographic features, perception of risks, risk aversion and subjective perception of past risk experience; farms’ technical-economic characteristics; and perception of local-level climate change. The results show that there are significant differences in the variables influencing the adoption of the risk management instruments. The findings provide useful information to support the decision-making process for three main stakeholders: farmers (optimal choice over the joint use of instruments), providers of agricultural risk management instruments (e.g., the design of new combinations of risk management instruments better targeted to distinct profiles of farmers), and policymakers (policy strategies aiming to promote better risk management within the agricultural sector).