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Assessing the effects of premium subsidies on crop insurance demand: An analysis for grain production in Southern Brazil

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  • Lavorato, M.
  • Braga, M.

Abstract

Following the well-succeed experience of developed countries such as Canada and the United States, Brazil implemented the Crop Insurance Program (PSR) in 2005 seeking to provide subsidies for the purchase of crop insurance policies by Brazilian farmers. Despite the importance of this public policy, there is no empirical investigation about the effects of premium subsidies on the quantity demanded for crop insurance in Brazil. This paper aimed to fill this gap through the investigation of the three grains – corn, soybeans and wheat – that are most cultivated in southern Brazil, the region where PSR is most developed. A fixed effects model was applied to an unbalanced panel data of municipalities of southern Brazil considering the years between 2006 and 2015. Three measures of crop insurance demand were considered: level of total premiums, level of total premiums per hectare and level of total liability per hectare. Results was in line with previous literature, suggesting the existence of a positive, although inelastic, effect of the subsidy level on the demand for crop insurance.

Suggested Citation

  • Lavorato, M. & Braga, M., 2018. "Assessing the effects of premium subsidies on crop insurance demand: An analysis for grain production in Southern Brazil," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 276025, International Association of Agricultural Economists.
    • Handle: RePEc:ags:iaae18:276025
    DOI: 10.22004/ag.econ.276025
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    References listed on IDEAS

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    1. ODonoghue, Erik & Tulman, Sarah, 2016. "The Demand for Crop Insurance: Elasticity and the Effect of Yield Shocks," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235623, Agricultural and Applied Economics Association.
    2. Gesmar Rosa dos Santos & Alexandre Gervásio de Sousa & Gustavo Alvarenga, 2013. "Seguro Agrícola no Brasil e o Desenvolvimento do Programa de Subvenção ao Prêmio," Discussion Papers 1910, Instituto de Pesquisa Econômica Aplicada - IPEA.
    3. 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.
    4. Woodard, Joshua, 2016. "Estimation of Insurance Deductible Demand under Endogenous Premium Rates," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 236151, Agricultural and Applied Economics Association.
    5. Ozaki, Vitor Augusto, 2008. "Em busca de um novo paradigma para o seguro rural no Brasil," Brazilian Journal of Rural Economy and Sociology (Revista de Economia e Sociologia Rural-RESR), Sociedade Brasileira de Economia e Sociologia Rural, vol. 46(1), pages 1-23, March.
    6. Barry K. Goodwin, 1993. "An Empirical Analysis of the Demand for Multiple Peril Crop Insurance," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 75(2), pages 425-434.
    7. Teresa Serra & Barry K. Goodwin & Allen M. Featherstone, 2003. "Modeling changes in the U.S. demand for crop insurance during the 1990s," Agricultural Finance Review, Emerald Group Publishing Limited, vol. 63(2), pages 109-125, November.
    8. Yi, Jing & Richardson, James & Bryant, Henry, 2016. "How Do Premium Subsidies Affect Crop Insurance Demand at Different Coverage Levels: the Case of Corn," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 236249, Agricultural and Applied Economics Association.
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    Cited by:

    1. Yong Liu & Alan P. Ker, 2021. "Simultaneous borrowing of information across space and time for pricing insurance contracts: An application to rating crop insurance policies," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 88(1), pages 231-257, March.
    2. Chemeris, Anna & Liu, Yong & Ker, Alan P., 2022. "Insurance subsidies, climate change, and innovation: Implications for crop yield resiliency," Food Policy, Elsevier, vol. 108(C).

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    Keywords

    Agricultural and Food Policy; Crop Production/Industries; International Relations/Trade;
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