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Production and Moral Hazard Effects of 2014 Cotton Farm Bill Policies

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  • Devadoss, Stephen
  • Luckstead, Jeff

Abstract

Abstract We develop a model for a representative risk-averse cotton farmer to analyze the impact of crop insurance policies (RP, YP, STAX, and SCO). The model is calibrated and numerically optimized to quantify the effects of different insurance policy combinations on input use, insurance coverage levels, premiums, and certainty equivalent. When the farmer elects only RP, the optimal coverage rate is 80%. Under RP&STAX, the optimal RP coverage rate is 70% and the STAX coverage rate is 90%. RP&STAX is the optimal policy combination based on certainty equivalents. The RP&SCO combination has the lowest impact of input use.

Suggested Citation

  • Devadoss, Stephen & Luckstead, Jeff, 2018. "Production and Moral Hazard Effects of 2014 Cotton Farm Bill Policies," 2018 Annual Meeting, February 2-6, 2018, Jacksonville, Florida 266763, Southern Agricultural Economics Association.
    • Handle: RePEc:ags:saea18:266763
    DOI: 10.22004/ag.econ.266763
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    Cited by:

    1. Stephen Devadoss & Jeff Luckstead, 2020. "US–Brazilian cotton policies," The World Economy, Wiley Blackwell, vol. 43(8), pages 2222-2236, August.

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    Keywords

    Agricultural and Food Policy; Risk and Uncertainty;

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