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Almost Ideal Area Yield Crop Insurance Contracts

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  • Smith, Vincent H.
  • Chouinard, Hayley H.
  • Baquet, Alan E.
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    Abstract

    Using yield data for a sample of 123 dryland wheat producers in Montana, the effects of three area yield contracts, including the contract currently offered by the United States Federal Crop Insurance Corporation and two individual yield contracts on individual farm yield variability, are examined. The results indicate that while the Federal Crop Insurance Corporation area yield contract provides all farmers in the sample with some protection against yield variability, a simpler, actuarially equivalent "almost ideal" area yield contract provides substantially larger reductions in yield variability. However, actuarially equivalent individual yield contracts provide levels of protection against yield variability similar to those obtained under the "almost ideal" area yield contract at much lower premiums.

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    Bibliographic Info

    Article provided by Northeastern Agricultural and Resource Economics Association in its journal Agricultural and Resource Economics Review.

    Volume (Year): 23 (1994)
    Issue (Month): 1 (April)
    Pages:

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    Handle: RePEc:ags:arerjl:31315

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    Web page: http://www.narea.org/
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    Related research

    Keywords: Risk and Uncertainty;

    References

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    1. Richard J. Arnott & Joseph E. Stiglitz, 1988. "The Basic Analytics of Moral Hazard," NBER Working Papers 2484, National Bureau of Economic Research, Inc.
    2. Fraser, Rob W., 1992. "An Analysis Of Willingness-To-Pay For Crop Insurance," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 36(01), April.
    3. Quiggin, John C., 1986. "A Note On The Viability Of Rainfall Insurance," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 30(01), April.
    4. Bardsley, Peter & Abey, Arun & Davenport, Scott V., 1984. "The Economics Of Insuring Crops Against Drought," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 28(01), April.
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    Cited by:
    1. Phelippe-Guinvarc'h, Martial V. & Cordier, Jean E., 2006. "A private management strategy for the crop yield insurer: A theoretical approach and tests," Insurance: Mathematics and Economics, Elsevier, vol. 39(1), pages 35-46, August.
    2. Bokusheva, Raushan & Breustedt, Gunnar & Heidelbach, Olaf, 2006. "Measurement and Comparison of Risk Reduction by Means of Farm Yield, Area Yield, and Weather Index Crop Insurance Schemes - The Case of Kazakhstani Wheat Farms," 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia 25523, International Association of Agricultural Economists.
    3. Mahul, Olivier & Vermersch, Dominique, 1999. "Hedging Crop Risk With Yield Insurance Futures And Options," 1999 Annual meeting, August 8-11, Nashville, TN 21672, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    4. Bokusheva, Raushan & Breustedt, Gunnar & Heidelbach, Olaf, 2007. "Ex-ante evaluation of weather-based index insurance and area-yield insurance for reducing crop yield risk," 101st Seminar, July 5-6, 2007, Berlin Germany 9250, European Association of Agricultural Economists.
    5. Geoffroy Enjolras & Robert Kast & Patrick Sentis, 2009. "Diversification in Area-Yield Crop Insurance : The Multi Linear Additive Model," Working Papers 09-15, LAMETA, Universtiy of Montpellier, revised Nov 2009.
    6. Turvey, Calum G. & Islam, Zahirul, 1995. "Equity and efficiency considerations in area versus individual yield insurance," Agricultural Economics: The Journal of the International Association of Agricultural Economists, International Association of Agricultural Economists, vol. 12(1), April.
    7. Turvey, Calum G. & Islam, Zahirul, 1995. "Equity and efficiency considerations in area versus individual yield insurance," Agricultural Economics, Blackwell, vol. 12(1), pages 23-35, April.

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