**6. Conclusions**

This article analysed how insurance affects the production decisions of commercial grape-growing farmers in Italy through the estimation of an endogenous panel stochastic frontier. More specifically, we investigated the crop insurance's effect on production, technical efficiency, and input use in Italian grape-growers' farms. Similar to Roll (2019), our findings show that insurance has a positive impact on production and efficiency, while it reduces the use of intermediate inputs. These results are fully consistent with neoclassic theory and indicate that insurance can play an essential role in the reduction of suboptimal input use due to the presence of uncertain outcomes. The increase in output found in this study suggests that in the case of grape production in Italy, the risk reduction effect dominates the moral hazard effect. In other words, the reduction in input use induced by insurance can be interpreted as a re-optimisation of input use rather than the effect of moral hazard. Furthermore, the input use optimisation due to insurance adoption may explain the gain in efficiency. Finally, we find that controlling for endogeneity in the causal relationship between insurance and production is needed to avoid biased parameters estimates.

A limitation of the study is related to the not fully reliable data in terms of labour. First, there is a high rate of missing values in hours worked in grape growing in during the years 2008 to 2010. Second, data referring to labour generally contain measurement errors because of the presence of factors such as illegal employment. Last, we have not considered the quality of labour distinguishing, for example, between skilled and unskilled labour or family and hired labour.

The main limitation of the study, though, is due to the different risk profiles of inputs included in the intermediate inputs that do not allow us to investigate the effect of insurance on the use of input with different attributes.

Since the substitution effect between insurance and intermediate inputs and the different nature of the inputs included in this variable in this study, further studies are needed to investigate the relationship between insurance and specific intermediate inputs used in the grape-growing sector.

Our findings have several policy implications. First, our results differ from that which was previously found in different crops and countries. This suggests that insurance and pesticide policies need to account for heterogeneity due to the specific condition in which each sector operates. Hence, it is not possible to give a policy indication based on the observation of what happens in a single sector. Second, the decrease in the use of intermediate inputs induced by insurance is good news for the success of the EU Commission's strategy aimed at reducing pesticide use. Insurance can contribute to reducing the external costs attributed to farmers' health and environment, in addition to preventing pest resistance.

**Author Contributions:** Conceptualization, S.R.; Data curation, S.R.; Formal analysis, S.R., F.C. and C.S.; Investigation, S.R., F.C. and C.S.; Methodology, S.R., F.C. and C.S.; Supervision, F.C. and C.S.; Validation, S.R., F.C. and C.S.; Visualization, S.R.; Writing—original draft, S.R.; Writing—review & editing, S.R. and C.S. All authors have read and agreed to the published version of the manuscript.

**Funding:** This research received no external funding.

**Data Availability Statement:** Restrictions apply to the availability of these data. Data were obtained from CREA (Consiglio per la ricerca in agricoltura e l'analisi dell'economia agraria) and are available (at URL https://bancadatirica.crea.gov.it/Account/Login.aspx?ReturnUrl=%2f, accessed on 30 July 2019) with the permission of CREA.

**Acknowledgments:** We thank Lerato Phali (University of Pretoria, Pretoria, South Africa) for language editing. We also thank Maurizio Prosperi and Antonio Lopolito (University of Foggia, Foggia, Italy) for the topical and intellectual discussions about the research and assistance and coordination for the research activity planning and execution.

**Conflicts of Interest:** The authors declare no conflict of interest.
