Advanced Search
MyIDEAS: Login

The impact of the average crop revenue election (ACRE) program on the effectiveness of crop insurance

Contents:

Author Info

  • Gabriel J. Power
  • Dmitry V. Vedenov
  • Sung-wook Hong

Abstract

Purpose – The purpose of this paper is to analyze the effect of the 2008 Farm Bill's average crop revenue election (ACRE) program on the risk-reducing effectiveness of crop insurance products. Design/methodology/approach – Three crop/region combinations are examined, representing regions with both high and low price-yield correlation regions. Actual production history (APH) and crop revenue coverage (CRC) insurance instruments are considered separately under the 2002 Farm Bill and under ACRE. Monte Carlo simulations, combined with the copula approach, are used to simulate net wealth distributions and to calculate the corresponding expected utilities. The outcomes are evaluated using certainty-equivalent wealth based on different risk premium assumptions. Findings – Crop insurance contracts appear to be more effective under the 2002 Farm Bill than under ACRE, especially for crops characterized by low yield-price correlation. CRC insurance is found to be more effective than APH insurance for all crop/region combinations considered. Research limitations/implications – The paper only considers a static framework and farm-level insurance contracts. Further research could investigate how ACRE affects decoupled income support, whether the results change if Supplemental Revenue Assistance is included, or how different the outcomes might be for multiple-crop farms. Practical implications – The results suggest that risk-reducing effectiveness decreases under ACRE and that no reasonable adjustment to APH base price can make APH competitive with CRC for any crop/regions considered. Originality/value – The risk-reducing effectiveness of the 2008 Farm Bill's ACRE program is analyzed, and as a methodological contribution the copula approach is used to model the multivariate distribution of yields and prices.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.emeraldinsight.com/Insight/viewContentItem.do;jsessionid=E87BE0007C9CF743186ED5E5EBAC304C?contentType=Article&contentId=1822318
Download Restriction: Cannot be freely downloaded

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Emerald Group Publishing in its journal Agricultural Finance Review.

Volume (Year): 69 (2009)
Issue (Month): 3 (November)
Pages: 330-345

as in new window
Handle: RePEc:eme:afrpps:v:69:y:2009:i:3:p:330-345

Contact details of provider:
Web page: http://www.emeraldinsight.com

Order Information:
Postal: Emerald Group Publishing, Howard House, Wagon Lane, Bingley, BD16 1WA, UK
Email:
Web: http://www.emeraldinsight.com/afr.htm

Related research

Keywords: Agriculture; Crops; Insurance; Legislation; United States of America;

Other versions of this item:

References

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.:
as in new window
  1. Vedenov, Dmitry V. & Power, Gabriel J., 2008. "Risk-Reducing Effectiveness of Revenue versus Yield Insurance in the Presence of Government Payments," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 40(02), August.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:eme:afrpps:v:69:y:2009:i:3:p:330-345. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Louise Lister).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.