IDEAS home Printed from https://ideas.repec.org/p/ags/eaae02/24842.html
   My bibliography  Save this paper

Revenue Insurance as an Income Stabilization Policy: An Application to the Spanish Olive Oil Sector

Author

Listed:
  • Bielza, Maria
  • Garrido, Alberto
  • Sumpsi, Jose Maria

Abstract

Various forms of revenue insurance have been applied in Canada and in the US with relative success. In this paper different combinations of traditional agricultural policies and revenue and yield insurance are analysed for the Spanish olive oil sector. Taking a database containing about half million Spanish olive growers during 8 campaigns, five possible policies are studied and the results are examined according to different criteria including average revenue and its variability, growers utility gains, taxpayers cost and the transfer efficiency of support. The policies analysed are: (1) non-intervention; (2) the policy currently in force in Spain that combines a production aid with a yield insurance; (3) a revenue insurance, only; (4) revenue insurance combined with a production aid; and (5) an aid per tree in combination with revenue insurance. The methodology is based on Monte-Carlo simulations performed on about 100 groups of growers that have been grouped according to their expected yields and variability. Assuming and estimating olive oil price and yields correlations for each group of growers, the analysis allows for consistent policy comparisons at a very disaggregate level. Using the results for all analysed groups, policies are ranked based on the above criteria at the provincial and national levels. Results show that the current regime of EU production aids of olive oil eliminates the advantage of extending the current yield insurance to a revenue insurance. It is also shown that the level of support delivered by production aids cannot be reached with revenue insurance even with completely subsidised premiums. Finally, it is shown that the policy that combines tree aids with revenue insurance exhibits good results for all examining criteria.

Suggested Citation

  • Bielza, Maria & Garrido, Alberto & Sumpsi, Jose Maria, 2002. "Revenue Insurance as an Income Stabilization Policy: An Application to the Spanish Olive Oil Sector," 2002 International Congress, August 28-31, 2002, Zaragoza, Spain 24842, European Association of Agricultural Economists.
    • Handle: RePEc:ags:eaae02:24842
    DOI: 10.22004/ag.econ.24842
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/24842/files/cp02bi07.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.22004/ag.econ.24842?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Goodwin, Barry K. & Ker, Alan P., 1998. "Revenue Insurance: A New Dimension in Risk Management," Choices: The Magazine of Food, Farm, and Resource Issues, Agricultural and Applied Economics Association, vol. 13(4), pages 1-4.
    2. David A. Hennessy & Bruce A. Babcock & Dermot J. Hayes, 1997. "Budgetary and Producer Welfare Effects of Revenue Insurance," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(3), pages 1024-1034.
    3. J. Wu & R. M. Adams, 2001. "Production Risk, Acreage Decisions and Implications for Revenue Insurance Programs," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 49(1), pages 19-35, March.
    4. Miller, Stephen E. & Kahl, Kandice H. & Rathwell, P. James, 2000. "Revenue Insurance For Georgia And South Carolina Peaches," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 32(1), pages 1-10, April.
    5. Calum G. Turvey & Vincent Amanor-Boadu, 1989. "Evaluating Premiums for a Farm Income Insurance Policy," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 37(2), pages 233-247, July.
    6. David A. Hennessy & Bruce A. Babcock & Dermot J. Hayes, 1997. "Budgetary and Producer Welfare Effects of Revenue Insurance," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(3), pages 1024-1034.
    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(2), pages 1-21, December.
    8. Miller, Stephen E. & Kahl, Kandice H. & Rathwell, P. James, 2000. "Revenue Insurance for Georgia and South Carolina Peaches," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 32(1), pages 123-132, April.
    9. Goodwin, Barry K. & Roberts, Matthew C. & Coble, Keith H., 2000. "Measurement Of Price Risk In Revenue Insurance: Implications Of Distributional Assumptions," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 25(1), pages 1-20, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Osama Ahmed & Teresa Serra, 2015. "Economic analysis of the introduction of agricultural revenue insurance contracts in Spain using statistical copulas," Agricultural Economics, International Association of Agricultural Economists, vol. 46(1), pages 69-79, January.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. María Bielza & Alberto Garrido & José M. Sumpsi, 2004. "Revenue insurance as an income stabilization policy: an application to the Spanish olive oil sector," Post-Print hal-01201063, HAL.
    2. Bielza, María & Garrido, Alberto & Sumpsi, José M., 2004. "Revenue insurance as an income stabilization policy: an application to the Spanish olive oil sector," Cahiers d'Economie et de Sociologie Rurales (CESR), Institut National de la Recherche Agronomique (INRA), vol. 70.
    3. María Bielza & Alberto Garrido & José M. Sumpsi, 2004. "Revenue insurance as an income stabilization policy: an application to the Spanish olive oil sector," Cahiers d'Economie et Sociologie Rurales, INRA Department of Economics, vol. 70, pages 5-27.
    4. Bielza, Maria & Garrido, Alberto & Sumpsi, Jose Maria, 2002. "El seguro de ingresos como instrumento de estabilizacion de las rentas de los agricultores: aplicacion al sector olivarero espanol," Economia Agraria y Recursos Naturales, Spanish Association of Agricultural Economists, vol. 2(01), pages 1-23.
    5. Makus, Larry D. & Wang, H. Holly & Chen, Xiaomei, 2003. "Evaluating Risk Management Strategies For Non-Irrigated Small Grain Producers," 2003 Annual meeting, July 27-30, Montreal, Canada 22257, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    6. Ashok Mishra & Barry Goodwin, 2006. "Revenue insurance purchase decisions of farmers," Applied Economics, Taylor & Francis Journals, vol. 38(2), pages 149-159.
    7. 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, Cambridge University Press, vol. 40(2), pages 443-459, August.
    8. Richards, Timothy J. & Manfredo, Mark R., 2003. "Infrequent Shocks and Rating Revenue Insurance: A Contingent Claims Approach," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 28(2), pages 1-19, August.
    9. Calum G. Turvey & Jeffrey R. Stokes, 2008. "Market Structure and the Value of Agricultural Contingent Claims," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 56(1), pages 79-94, March.
    10. Wang, H. Holly & Hanson, Steven D. & Black, J. Roy, 2003. "Efficiency Costs of Subsidy Rules for Crop Insurance," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 28(1), pages 1-22, April.
    11. Mitchell, Paul D. & Knight, Thomas O., 2008. "Economic Analysis of Supplemental Deductible Coverage as Recommended in the USDA's 2007 Farm Bill Proposal," Agricultural and Resource Economics Review, Cambridge University Press, vol. 37(1), pages 117-131, April.
    12. Željko Kokot & Todor Marković & Sanjin Ivanović & Maja Meseldžija, 2020. "Whole-Farm Revenue Protection as a Factor of Economic Stability in Crop Production," Sustainability, MDPI, vol. 12(16), pages 1-11, August.
    13. Mason, Charles Edwin, IV, 2000. "Estimation and attenuation of reinsurance risk in the crop insurance market," ISU General Staff Papers 2000010108000013703, Iowa State University, Department of Economics.
    14. Motamed, Mesbah J., 2021. "Price-Yield Covariance Effects on Producers’ Risk Profile and Risk Response," 2021 Annual Meeting, August 1-3, Austin, Texas 314082, Agricultural and Applied Economics Association.
    15. Ramirez, Octavio A. & Shonkwiler, J. Scott, 2017. "A Probabilistic Model of Crop Insurance Purchase Decision," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 42(1), pages 1-17, January.
    16. Mitchell, Paul D. & Zhu, En (John), 2003. "Moral Hazard And Bt Corn Refuge," 2003 Annual meeting, July 27-30, Montreal, Canada 22113, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    17. Mitchell, Paul D., 2004. "Nutrient Best Management Practice Insurance and Farmer Perceptions of Adoption Risk," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 36(3), pages 657-673, December.
    18. Mitchell, Paul D. & Knight, Thomas O., 2007. "Economic Analysis of Supplemental Deductible Coverage as Recommended in the USDA’s 2007 Farm Bill Proposal," Staff Papers 92125, University of Wisconsin-Madison, Department of Agricultural and Applied Economics.
    19. Abel Tiemtore, 2021. "Examining the effects of agricultural income insurance on farmers in Burkina Faso," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 46(3), pages 422-439, July.
    20. Chad E. Hart & Bruce A. Babcock & Dermot J. Hayes, 2001. "Livestock Revenue Insurance," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 21(6), pages 553-580, June.

    More about this item

    Keywords

    Risk and Uncertainty;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:eaae02:24842. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/eaaeeea.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.