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Economic Analysis of Supplemental Deductible Coverage as Recommended in the USDA's 2007 Farm Bill Proposal

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Author Info
Mitchell, Paul D. (U of Wisconsin)
Knight, Thomas O. (Texas Tech U)

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Abstract

A primary change to crop insurance contained in the USDA's Farm Bill Proposal is Supplemental Deductible Coverage (SDC). SDC would allow farmers who purchase individual crop insurance coverage to purchase GRP in the amount of the individual policy deductible. GRP indemnities would be accelerated compared with the current GRP policy. Analysis indicates that SDC provides substantial benefits in terms of certainty equivalent gains. The largest benefits are realized by low risk farmers, compared to others in the county, and farmers whose yields are highly correlated with the county yield. Optimal individual policy coverage levels generally decrease when SDC is taken.

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File URL: http://www.aae.wisc.edu/pubs/sps/pdf/stpap509.pdf
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Publisher Info
Paper provided by University of Wisconsin, Agricultural and Applied Economics in its series Staff Paper Series with number 509.

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Date of creation: Jul 2007
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Handle: RePEc:ecl:wisagr:509

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  1. Bruce A. Babcock & Chad E. Hart & Dermot J. Hayes, 2004. "Actuarial Fairness of Crop Insurance Rates with Constant Rate Relativities," American Journal of Agricultural Economics, American Agricultural Economics Association, vol. 86(3), pages 563-575, 08. [Downloadable!] (restricted)
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  2. David A. Hennessy & Bruce A. Babcock & Dermot J. Hayes, 1997. "Budgetary and Producer Welfare Effects of Revenue Insurance, The," Center for Agricultural and Rural Development (CARD) Publications 97-wp180, Center for Agricultural and Rural Development (CARD) at Iowa State University. [Downloadable!]
  3. 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(02), December. [Downloadable!]
  4. Calum G. Turvey & Alfons Weersink & Szu-Hsuan Celia Chiang, 2006. "Pricing Weather Insurance with a Random Strike Price: The Ontario Ice-Wine Harvest," American Journal of Agricultural Economics, American Agricultural Economics Association, vol. 88(3), pages 696-709, 08. [Downloadable!] (restricted)
  5. Vedenov, Dmitry V. & Epperson, James E. & Barnett, Barry J., 2006. "Designing Catastrophe Bonds to Securitize Systemic Risks in Agriculture: The Case of Georgia Cotton," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 31(02), August. [Downloadable!]
  6. Paul D. Mitchell & Michael E. Gray & Kevin L. Steffey, 2004. "A Composed-Error Model for Estimating Pest-Damage Functions and the Impact of the Western Corn Rootworm Soybean Variant in Illinois," American Journal of Agricultural Economics, American Agricultural Economics Association, vol. 86(2), pages 332-344, 05. [Downloadable!] (restricted)
  7. Chavas, Jean-Paul & Holt, Matthew T, 1996. "Economic Behavior under Uncertainty: A Joint Analysis of Risk Preferences and Technology," The Review of Economics and Statistics, MIT Press, vol. 78(2), pages 329-35, May. [Downloadable!] (restricted)
  8. Seo, Sangtaek & Mitchell, Paul D. & Leatham, David J., 2005. "Effects of Federal Risk Management Programs on Optimal Acreage Allocation and Nitrogen Use in a Texas Cotton-Sorghum System," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 37(03), December. [Downloadable!]
  9. Xiaohui Deng & Barry J. Barnett & Dmitry V. Vedenov, 2007. "Is There a Viable Market for Area-Based Crop Insurance?," American Journal of Agricultural Economics, American Agricultural Economics Association, vol. 89(2), pages 508-519, 05. [Downloadable!] (restricted)
  10. Hennessy, David A. & Babcock, Bruce A. & Hayes, Dermot J., 1997. "Budgetary and Producer Welfare Effects of Revenue Insurance," Staff General Research Papers 1100, Iowa State University, Department of Economics. [Downloadable!]
  11. Bharat Ramaswami & Terry L. Roe, 2004. "Aggregation in Area-Yield Crop Insurance: The Linear Additive Model," American Journal of Agricultural Economics, American Agricultural Economics Association, vol. 86(2), pages 420-431, 05. [Downloadable!] (restricted)
  12. Terrance M. Hurley & Paul D. Mitchell & Marlin E. Rice, 2004. "Risk and the Value of Bt Corn," American Journal of Agricultural Economics, American Agricultural Economics Association, vol. 86(2), pages 345-358, 05. [Downloadable!] (restricted)
  13. Coble, Keith H. & Zuniga, Manuel & Heifner, Richard, 2003. "Evaluation of the interaction of risk management tools for cotton and soybeans," Agricultural Systems, Elsevier, vol. 75(2-3), pages 323-340. [Downloadable!] (restricted)
  14. Laura Schechter, 2007. "Risk aversion and expected-utility theory: A calibration exercise," Journal of Risk and Uncertainty, Springer, vol. 35(1), pages 67-76, August. [Downloadable!] (restricted)
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