Empirically Evaluating the Flexibility of the Johnson Family of Distributions: A Crop Insurance Application
AbstractThis article examines the flexibility of the Johnson system of distributions by assessing its per-formance in terms of modeling crop yields for the purpose of setting actuarially fair crop in-surance premiums. Using data from corn farms in Illinois coupled with Monte Carlo simula-tion procedures, we found that average crop insurance premiums computed on the basis of the Johnson system provide reasonably accurate estimates even when the data are normal or come from a non-normal distribution other than the Johnson system (i.e., a beta). These results sug-gest that there is potential for using the Johnson system to rate previously uninsured crops that do not have historical insurance performance data upon which to base premium calculations.
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Bibliographic InfoArticle provided by Northeastern Agricultural and Resource Economics Association in its journal Agricultural and Resource Economics Review.
Volume (Year): 37 (2008)
Issue (Month): 1 (April)
crop insurance; crop yield modeling; Johnson distribution; premium rate setting; Risk and Uncertainty;
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2001 Conference, April 23-24, 2001, St. Louis, Missouri
18953, NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
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