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Modeling Texas Dryland Cotton Yields, With Application to Crop Insurance Actuarial Rating

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  • Chen, Shu-Ling
  • Miranda, Mario J.

Abstract

Texas dryland upland cotton yields have historically exhibited greater variation and more distributional irregularities than the yields of other crops, raising concerns that conventional parametric distribution models may generate biased or otherwise inaccurate crop insurance premium rate estimates. Here, we formulate and estimate regime-switching models for Texas dryland cotton yields in which the distribution of yield is conditioned on local drought conditions. Our results indicate that drought-conditioned regime-switching models provide a better fit to Texas county-level dryland cotton yields than conventional parametric distribution models. They do not, however, generate significantly different Group Risk Plan crop insurance premium rate estimates.

Suggested Citation

  • Chen, Shu-Ling & Miranda, Mario J., 2008. "Modeling Texas Dryland Cotton Yields, With Application to Crop Insurance Actuarial Rating," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 40(1), pages 239-252, April.
    • Handle: RePEc:cup:jagaec:v:40:y:2008:i:1:p:239-252_19
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    Cited by:

    1. Hennessy, David A., 2009. "Crop Yield Skewness and the Normal Distribution," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 34(1), pages 1-19, April.
    2. Rejesus, Roderick M. & Marra, Michele C. & Roberts, Roland K. & English, Burton C. & Larson, James A. & Paxton, Kenneth W, 2013. "Changes in Producers’ Perceptions of Within-Field Yield Variability after Adoption of Cotton Yield Monitors," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 45(2), pages 1-18, May.

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