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Economic Analysis of Supplemental Deductible Coverage as Recommended in the USDA's 2007 Farm Bill Proposal

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Author Info
Mitchell, Paul D.
Knight, Thomas O.

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Abstract

A primary change to crop insurance contained in the USDA’s Farm Bill proposal is supplemental deductible coverage (SDC). SDC would allow farmers who purchase individual crop insurance coverage to purchase area-wide coverage in the amount of the individual policy deductible. This supplemental area-wide coverage would be similar to the existing Group Risk Plan policy, but with an accelerated indemnity schedule. Analysis indicates that SDC increases farmer certainty equivalents. The largest benefits are realized by farmers with high yield potential in counties with greater systemic risk. In general, optimal individual policy coverage levels modestly decrease when SDC is taken.

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

Volume (Year): 37 (2008)
Issue (Month): 1 (April)
Pages:
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Handle: RePEc:ags:arerjl:44743

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Related research
Keywords: crop insurance; area-wide coverage; actual production history (APH); group risk plan (GRP); yield distribution; Risk and Uncertainty;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Chavas, Jean-Paul & Holt, Matthew T, 1996. "Economic Behavior under Uncertainty: A Joint Analysis of Risk Preferences and Technology," The Review of Economics and Statistics, MIT Press, vol. 78(2), pages 329-35, May. [Downloadable!] (restricted)
  2. Seo, Sangtaek & Mitchell, Paul D. & Leatham, David J., 2005. "Effects of Federal Risk Management Programs on Optimal Acreage Allocation and Nitrogen Use in a Texas Cotton-Sorghum System," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 37(03), December. [Downloadable!]
  3. Bruce A. Babcock & Chad E. Hart & Dermot J. Hayes, 2004. "Actuarial Fairness of Crop Insurance Rates with Constant Rate Relativities," American Journal of Agricultural Economics, American Agricultural Economics Association, vol. 86(3), pages 563-575, 08. [Downloadable!] (restricted)
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  4. Xiaohui Deng & Barry J. Barnett & Dmitry V. Vedenov, 2007. "Is There a Viable Market for Area-Based Crop Insurance?," American Journal of Agricultural Economics, American Agricultural Economics Association, vol. 89(2), pages 508-519, 05. [Downloadable!] (restricted)
  5. David A. Hennessy & Bruce A. Babcock & Dermot J. Hayes, 1997. "Budgetary and Producer Welfare Effects of Revenue Insurance, The," Center for Agricultural and Rural Development (CARD) Publications 97-wp180, Center for Agricultural and Rural Development (CARD) at Iowa State University. [Downloadable!]
  6. Hennessy, David A. & Babcock, Bruce A. & Hayes, Dermot J., 1997. "Budgetary and Producer Welfare Effects of Revenue Insurance," Staff General Research Papers 1100, Iowa State University, Department of Economics. [Downloadable!]
  7. Coble, Keith H. & Heifner, Richard G. & Zuniga, Manuel, 2000. "Implications Of Crop Yield And Revenue Insurance For Producer Hedging," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 25(02), December. [Downloadable!]
  8. Calum G. Turvey & Alfons Weersink & Szu-Hsuan Celia Chiang, 2006. "Pricing Weather Insurance with a Random Strike Price: The Ontario Ice-Wine Harvest," American Journal of Agricultural Economics, American Agricultural Economics Association, vol. 88(3), pages 696-709, 08. [Downloadable!] (restricted)
  9. Bharat Ramaswami & Terry L. Roe, 2004. "Aggregation in Area-Yield Crop Insurance: The Linear Additive Model," American Journal of Agricultural Economics, American Agricultural Economics Association, vol. 86(2), pages 420-431, 05. [Downloadable!] (restricted)
  10. Terrance M. Hurley & Paul D. Mitchell & Marlin E. Rice, 2004. "Risk and the Value of Bt Corn," American Journal of Agricultural Economics, American Agricultural Economics Association, vol. 86(2), pages 345-358, 05. [Downloadable!] (restricted)
  11. Vedenov, Dmitry V. & Epperson, James E. & Barnett, Barry J., 2006. "Designing Catastrophe Bonds to Securitize Systemic Risks in Agriculture: The Case of Georgia Cotton," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 31(02), August. [Downloadable!]
  12. Paul D. Mitchell & Michael E. Gray & Kevin L. Steffey, 2004. "A Composed-Error Model for Estimating Pest-Damage Functions and the Impact of the Western Corn Rootworm Soybean Variant in Illinois," American Journal of Agricultural Economics, American Agricultural Economics Association, vol. 86(2), pages 332-344, 05. [Downloadable!] (restricted)
  13. Coble, Keith H. & Zuniga, Manuel & Heifner, Richard, 2003. "Evaluation of the interaction of risk management tools for cotton and soybeans," Agricultural Systems, Elsevier, vol. 75(2-3), pages 323-340. [Downloadable!] (restricted)
  14. Laura Schechter, 2007. "Risk aversion and expected-utility theory: A calibration exercise," Journal of Risk and Uncertainty, Springer, vol. 35(1), pages 67-76, August. [Downloadable!] (restricted)
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