Advanced Search
MyIDEAS: Login to save this paper or follow this series

Risk Sharing and Incentives with Crop Insurance and External Equity Financing

Contents:

Author Info

  • Seo, Sangtaek
  • Leatham, David J.
  • Mitchell, Paul D.

Abstract

Farmers have increasingly been procuring external equity financing through either written or verbal business arrangements. Passage of the Agricultural Risk Protection Act in 2000 has resulted in widespread adoption of crop insurance among farmers. Crop insurance changes farmers’ production decisions, so that investors providing external equity may want to adjust the equity financing contract to account for these changes. This paper uses a principal-agent model to determine optimal risk sharing and incentives under crop insurance and external equity financing. Results show that with the introduction of crop insurance, the investor’s optimal equity financing contract requires that the farmer bears more risk in order to have the incentive to work hard.

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://purl.umn.edu/132523
Download Restriction: no

Bibliographic Info

Paper provided by Regional Research Committee NC-1014: Agricultural and Rural Finance Markets in Transition in its series Proceedings: 2003 Regional Committee NCT-194, October 6-7, 2003; Kansas City, Missouri with number 132523.

as in new window
Length:
Date of creation: 2003
Date of revision:
Handle: RePEc:ags:nc2003:132523

Contact details of provider:
Email:
Web page: http://www.agfin.ifas.ufl.edu/
More information through EDIRC

Related research

Keywords: risk sharing; incentives; crop insurance; equity financing; principal agent model.; Agricultural Finance; Risk and Uncertainty;

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. Leatham, David J. & McCarl, Bruce A. & Richardson, James W., 1987. "Implications Of Crop Insurance For Farmers And Lenders," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 19(02), December.
  2. Babcock, Bruce A. & Hennessy, David A., 1996. "Input Demand Under Yield and Revenue Insurance," Staff General Research Papers 794, Iowa State University, Department of Economics.
  3. Douglas W. Allen & Dean Lueck, 2004. "The Nature of the Farm: Contracts, Risk, and Organization in Agriculture," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262511851, December.
  4. 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.
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:ags:nc2003:132523. 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: (AgEcon Search).

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.