Risk Management in Traditional Agriculture: Intercropping in Italian Wine Production

Authors: Giovanni Federico and Pablo Martinelli Lasheras

Read the full paper here

What has to do the exposure to Barbary Pirate raids in Early Modern Italy with vine-planting techniques in the early 20th century? You will learn it by reading this short entry.

In a recent paper, Giovanni Federico (New York University Abu Dhabi- NYUAD) and Pablo Martinelli (University Carlos III Madrid – UC3M) study the economics of intercropping in Italian traditional agriculture.

The economics of vine intercropping: a spatial diversification strategy.

Intercropping is the practice of growing several crops simultaneously on the same plot.

We study the case of vine intercropping, a practice consisting in planting vines in a scattered pattern and in growing other (mostly field) crops in between, rather than concentrating vines in specialized vineyards.

Vine intercropping was widely adopted in Italy from the Late Middle Ages to the mid of the 20th century, and accounted for ca. half of Italian wine production in the interwar years.

Studying viticulture is relevant because wine was a major agricultural product for the still largely agrarian Italian economy.

In the early 20th century, wine accounted for nearly 8% of Italian GDP:

Wine was also grown almost everywhere in Italy, and in some areas the relevance of viticulture to the local economy was gigantic, as shown by the following map:

Any aspect associated to wine-growing, such as the planting techniques, had therefore important social welfare implications for the local economy.

Yet, intercropping was not uniformly adopted across the country, as the following map shows:

Why did peasants adopt intercropping? Why did they so only in certain areas of the country?

Why did a planting practice that lasted for over half a millennium (according to documented evidence) disappear in a couple of decades following WWII?

Spatial dispersion of vines and simultaneous growth of different crops in the same field increased production costs.

At the same time, spatial diversification was a form of risk management, reducing the risk of losing the whole harvest of a single product by field-specific negative shocks.

In absence of developed financial markets, traditional peasants relied on this strategy of risk management.

Barbary piracy, scattered vs agglomerated settlement and the historical adoption of intercropping.

A key parameter influencing the price (and therefore the likelihood of its adoption) of this form of insurance was the distance of peasant dwellings from their fields.

Although in the paper we also discuss some ecological and risk-related determinants of intercropping, we show that it was strongly correlated with the settlement pattern, as is evident from this map:

In the Northeast-Centre a large share of population inhabited in scattered dwellings, isolated in the countryside.

The reduced distance from peasant dwellings to their fields made insurance in the form of intercropping profitable, and hence it prevailed in this area.

In many parts of the South and of the Islands rural population lived concentrated in agrotowns, at great distance form their fields.

Those distances to individual plots made intercropping unprofitable, and full field-specialization prevailed in these areas.

Vineyards were planted very close to agrotowns, while cereals (requiring less frequent trips to the field) prevailed in the more distant plots.

The paper uses data from the 1930s and shows that this correlation between the prevalence of intercropping and the settlement pattern was strong and robust to a wide set of controls and changes in specification.

The paper also identifies the causality of this correlation by exploiting a major historical source of concentration of population in agrotowns: exposure to Barbary piracy.

From the late Middle Ages, Barbary pirates raided Italian coasts in slave-taking raids that lasted until the early 19th century.

This threat provided exogenous incentives for the rural population to concentrate in agglomerated dwellings (‘agrotowns’), which then interacted with other social and economic forces (i.e., the control of the labour force by feudal lords).

The exposure to Tunis, the main origin of Barbary raids to Italy, with the fastest pre-industrial technology strongly predicts the settlement pattern in the early 20th century.

Using this exposure as an instrument for the settlement pattern in an Instrumental Variables strategy, we confirm the causal relationship between distance to the fields and the adoption of intercropping as an insurance mechanism.

We also show that intercropping, after many centuries of existence, vanished in the 1970s-1980s, following a fast decline that began in the 1950s.

Although public policies, financial development and technical change played a role, the rural exodus and the changing settlement pattern is (again) the best predictor of the variation in the demise of intercropping across Italy.

Today, many wine-growing areas of Italy advertise their landscapes as a combination of nature, history and tradition. Among the most renowned of these areas, we find the Chianti in Tuscany.

Yet, the dense and specialised vineyards that entirely cover the Chianti hills today are the result of an extremely recent human intervention.

Far from being an example of ‘traditional landscapes’, until just a couple of generations ago the Chianti hills looked totally different.

Where today vines dominate the sight, until the Italian Economic Miracle the observer was faced with a patchwork of dispersed vines and olive trees among wheat fields.

A traditional agricultural practice such as vine intercropping persisted during centuries just until the underlying economic fundamentals made it profitable to adopt it.

The case of the rise, persistence and fall of vine intercropping is another witness of the inventiveness, resilience and economic rationality of the traditional peasantry.