A Generic Bio-Economic Farm Model for Environmental and Economic Assessment of Agricultural Systems

Bio-economic farm models are tools to evaluate ex-post or to assess ex-ante the impact of policy and technology change on agriculture, economics and environment. Recently, various BEFMs have been developed, often for one purpose or location, but hardly any of these models are re-used later for other purposes or locations. The Farm System Simulator (FSSIM) provides a generic framework enabling the application of BEFMs under various situations and for different purposes (generating supply response functions and detailed regional or farm type assessments). FSSIM is set up as a component-based framework with components representing farmer objectives, risk, calibration, policies, current activities, alternative activities and different types of activities (e.g., annual and perennial cropping and livestock). The generic nature of FSSIM is evaluated using five criteria by examining its applications. FSSIM has been applied for different climate zones and soil types (criterion 1) and to a range of different farm types (criterion 2) with different specializations, intensities and sizes. In most applications FSSIM has been used to assess the effects of policy changes and in two applications to assess the impact of technological innovations (criterion 3). In the various applications, different data sources, level of detail (e.g., criterion 4) and model configurations have been used. FSSIM has been linked to an economic and several biophysical models (criterion 5). The model is available for applications to other conditions and research issues, and it is open to be further tested and to be extended with new components, indicators or linkages to other models

Weather Index Insurance and Climate Change: Opportunities and Challenges in Lower Income Countries

Weather index insurance underwrites a weather risk, typically highly correlated with agricultural production losses, as a proxy for economic loss and is gaining popularity in lower income countries. This instrument, although subject to basis risk and high start-up costs, should reduce costs over traditional agricultural insurance. Multilateral institutions have suggested that weather index insurance could enhance the ability of stakeholders in lower income countries to adapt to climate change. While weather index insurance could have several benefits in this context (e.g. providing a safety net to vulnerable households and price signals regarding the weather risk), climate change impacts increase the price of insurance due to increasing weather risk. Uncertainty about the extent of regional impacts compounds pricing difficulties. Policy recommendations for insurance market development include funding risk assessments, start-up costs and the extreme layer of risk. General premium subsidies are cautioned against as they may actually slow household adaptation. The Geneva Papers (2009) 34, 401–424. doi:10.1057/gpp.2009.11