The Determinants of Chemical Input Use in Agriculture: A Dynamic Analysis of the Wine Grape–Growing Sector in France

Abstract

This article examines the determinants of chemical consumption by French winegrowers on an individual basis. We introduce criteria relating to the structure of vineyards and the financial situation of the winegrowers. Using data from the Farm Accountancy Data Network (FADN-RICA) for the period 2002-2007 from an annual sample of 607 winegrowers, we study the different factors that encourage winegrowers to use chemical inputs to protect or increase the yield of their vines. Drawing on transversal and longitudinal analyses, we illustrate the benefits derived from differentiating the demand for inputs according to their classification: pesticides or fertilizers. Climatic variables, physical size, and turnover all act as driving forces in the decision to use chemical inputs. We show that taking out crop insurance functions as a substitute for inputs and observe a double moral hazard effect: Winegrowers who increase their insurance coverage reduce their consumption of inputs the most and receive greater compensation; among insured winegrowers, those who use the most inputs make the most claims. As wine grape growing is a consistent activity conducted over a long period, we observe permanence in patterns of use of chemical inputs. (JEL Classifications: Q12, Q13, Q14)

How does crop insurance influence pesticide use? Evidence from French farms

“…Fernandez-Cornejo and Ferraioli (1999) and Wu (1999) showed that educated and younger farmers apply fewer pesticides because they are more aware of their drawbacks. Aubert and Enjolras (2014a) and Mishra et al (2005) also proved that productive farms and farms located in less-favored areas are more prone to pesticide use. Indeed, such areas face natural handicaps (e.g., lack of water and unfavorable climate) or are mountainous or hilly, which increases production risk.…”

“…For instance, risk averse farmers are more willing to apply pesticides (Pannell 1991). Pesticide applications can also be tactical after unfavorable weather conditions prone to crop diseases (Aubert and Enjolras 2014a;Horowitz and Lichtenberg 1993;Mishra et al 2005).…”

“…For that reason, it has also been suggested that pesticide use and crop insurance purchase might be endogenous, an assumption widely validated by the literature (Babcock and Hennessy 1996;Chakir and Hardelin 2014;Goodwin et al 2004;Wu 1999). However, as recalled by Aubert and Enjolras (2014a), the decision to take out insurance must be made before the beginning of the season in order to avoid moral hazard effects. Insurance purchase also requires the farmer to pay a premium in exchange for which the insurance company may provide a financial compensation in the event of the partial or total destruction of the harvest.…”

“…Many ways to reduce pesticides have been studied in the literature such as changes in agricultural practices (Baschet and Pingault 2009) and taxation (Finger et al 2017). Among them, crop insurance and pesticides have been considered, conceptually speaking, as close substitutes given their effects on yields (Aubert and Enjolras 2014a;Chakir and Hardelin 2014;Feinerman et al 1992;Horowitz and Lichtenberg 1993;Smith and Goodwin 1996). Indeed, both pesticides and crop insurance policies contribute to preserve farm income.…”

Revisiting Pesticide Taxation Schemes

“…Second, improved equipment and spraying technology can reduce emissions from pesticide use. For example, Aubert and Enjolras (2014) show in an analysis for French wine producer that the age of the equipment is significantly increasing the likelihood of overapplication of pesticides. Investment in better technologies remains an important policy measure even in developed countries.…”