The Role of area-yield crop insurance program face to the Mid-term Review of Common Agricultural Policy

dryland pasture production and with variations of its nutritional value in the Alentejo
dryland region. It was considered the farmer's possibility to finance his own farming
activity with equity and with borrowed and purchased funds. There is also considered a
tax on the farm income.

The specific data of each one of the farms were obtained through interviews. These
interviews allowed the obtaining of specific agricultural data of each one of the farms
such an as: area, soil types, crop and livestock technologies, agricultural machinery,
workers and perception face to the risk. It was in the interviews that they were obtained
the attitudes face to the risk, through the elicitation of the value function and of the
probability weighting function. The interviews were accomplished for 35 farmers and it
was possible to elicit values for the estimation of the value function and probability
weighting function for 9 farmers. The data for these nine farmers are represented in the
tables1. It is verified that the farm activities are diversified in terms of the dimension and
of the oak-plantation farms where livestock feed. The analysis of the table 1 allows
verifying that three of the farms do not have any livestock production, two of them
produce sheep and four of them produce beef cattle. These results will be used as a limit
superior and a limit inferior in the estimation process of the value functions and the
probability weighting function. The average value will be used for validation of the
model. The inquiry asked the farmers if they would be willing to change the production
technology substantially, all of them answered no and with respect to livestock
production, they were not willing to increase their production because they would harm
the oak-plantation activities. The inquiry shows that the farmers are extremely dependent
of crop production, namely of the durum wheat. All the farmers produce durum wheat in

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