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Revisiting the demand of agricultural insurance: The case of Spain

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  • Garrido, Alberto
  • Zilberman, David

Abstract

We use the actual insurance records of 52,300 farmers and 11 years to estimate two sets of insurance demands. We define measures of insurance's expected returns, variance and third moment, based on observed insurance data, and infer the expected returns for those farmers that have never had an indemnity. We estimate several probit models and count models for the insuring vs non-insuring strategies, in which the economic returns of insurance and its two measures of dispersion enter as explanatory variables. Results show that farmers' insurance strategies are largely explained by their actual insurance experience as captured by these three variables. Individuals with loss rations greater than 1 do not show more responsiveness that those facing more balanced premium charges. Results show that adverse selection may not be a major source of inefficiency in the Spanish insurance system.

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Paper provided by European Association of Agricultural Economists in its series 101st Seminar, July 5-6, 2007, Berlin Germany with number 9266.

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Date of creation: 2007
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Handle: RePEc:ags:eaa101:9266

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Keywords: Agricultural insurance; insurance demand models; Spain; Risk and Uncertainty; G22; Q12; Q14;

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  1. Moschini, Giancarlo & Hennessy, David A., 2001. "Uncertainty, risk aversion, and risk management for agricultural producers," Handbook of Agricultural Economics, in: B. L. Gardner & G. C. Rausser (ed.), Handbook of Agricultural Economics, edition 1, volume 1, chapter 2, pages 88-153 Elsevier.
  2. Quiggin, John C. & Karagiannis, Giannis & Stanton, J., 1993. "Crop Insurance And Crop Production: An Empirical Study Of Moral Hazard And Adverse Selection," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 37(02), August.
  3. Nimon, R. Wesley & Mishra, Ashok K., 2001. "Revenue Insurance and Chemical Input Use Rates," 2001 Annual meeting, August 5-8, Chicago, IL 20669, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  4. Bruce A. Babcock & Joseph A. Herriges, 1994. "Input Demand Under Yield and Revenue Insurance," Center for Agricultural and Rural Development (CARD) Publications 94-wp127, Center for Agricultural and Rural Development (CARD) at Iowa State University.
  5. Vincent H. Smith & Barry K. Goodwin, 1996. "Crop Insurance, Moral Hazard, and Agricultural Chemical Use," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(2), pages 428-438.
  6. Keith H. Coble & Thomas O. Knight & Rulon D. Pope & Jeffery R. Williams, 1996. "Modeling Farm-Level Crop Insurance Demand with Panel Data," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(2), pages 439-447.
  7. Barnett, Barry J., 2004. "Agricultural Index Insurance Products: Strengths And Limitations," Agricultural Outlook Forum 2004 32971, United States Department of Agriculture, Agricultural Outlook Forum.
  8. Goodwin, Barry K., 1994. "Premium Rate Determination In The Federal Crop Insurance Program: What Do Averages Have To Say About Risk?," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 19(02), December.
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Cited by:
  1. Margarita Genius & Phoebe Koundouri & Celine Nauges & Vangelis Tzouvelekas, . "Information Transmission in Irrigation Technology Adoption and Diffusion: Social Learning, Extension Services, and Spatial Effects," DEOS Working Papers 1329, Athens University of Economics and Business.
  2. Di Falco, Salvatore & Capitanio, Fabian & Adinolfi, Felice, 2011. "Natural Vs Financial Insurance in the Management of Weather Risk Exposure in the Italian Agriculture," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114325, European Association of Agricultural Economists.
  3. Robert Aidoo & James Osei Mensah & Prosper Wie & Dadson Awunyo-vitor, 2014. "Prospects of Crop Insurance as a Risk Management Tool among Arable Crop Farmers in Ghana," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 4(3), pages 341-354, March.
  4. Enjolras, Geoffroy & Sentis, P., 2008. "The Main Determinants of Insurance Purchase: An Empirical Study on Crop Insurance Policies in France," 2008 International Congress, August 26-29, 2008, Ghent, Belgium 44395, European Association of Agricultural Economists.
  5. Robert Finger & Niklaus Lehmann, 2012. "The influence of direct payments on farmers’ hail insurance decisions," Agricultural Economics, International Association of Agricultural Economists, vol. 43(3), pages 343-354, 05.
  6. Garrido, Alberto & Bielza, Maria, 2008. "Income Stabilisation in a Changing Agricultural World: Policy and Tools," 108th Seminar, February 8-9, 2008, Warsaw, Poland 48108, European Association of Agricultural Economists.

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