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The Economics Of Insuring Crops Against Drought

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  • Bardsley, Peter
  • Abey, Arun
  • Davenport, Scott V.

Abstract

The necessary conditions for the existence of a financially viable crop insurance scheme against drought are examined. A supply and demand model for crop insurance is developed which identifies the parameters that are critical to the efficiency of such a scheme. The values of these parameters are estimated by using data from the Australian wheat industry. It is found that crop insurance against drought would appear to be unattractive from an efficiency point of view.

Suggested Citation

  • Bardsley, Peter & Abey, Arun & Davenport, Scott V., 1984. "The Economics Of Insuring Crops Against Drought," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 28(01), April.
  • Handle: RePEc:ags:ajaeau:22590
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    1. Peter J. Barry & C. B. Baker, 1971. "Reservation Prices on Credit Use: A Measure of Response to Uncertainty," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 53(2), pages 222-227.
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    Cited by:

    1. Turvey, Calum G. & Norton, Michael T., 2008. "An Internet-Based Tool for Weather Risk Management," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 37(1), April.
    2. repec:pal:gpprii:v:42:y:2017:i:2:d:10.1057_s41288-016-0039-7 is not listed on IDEAS
    3. Chambers, Robert G. & Quiggin, John C., 2004. "Technological and financial approaches to risk management in agriculture: an integrate approach," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 48(2), June.
    4. Bardsley, Peter, 1986. "A Note On The Viability Of Rainfall Insurance - Reply," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 30(01), April.
    5. Kemeze, Francis H. & Miranda, Mario J. & Kuwornu, John & Amin-Somuah, Henry, 2016. "Optimal Management of Runoff Reservoir Supply: The Case of Tono Reservoir in Northern Ghana," 2016 Annual Meeting, July 31-August 2, 2016, Boston, Massachusetts 236030, Agricultural and Applied Economics Association.
    6. Ali, Akhter, 2013. "Farmers’ Willingness to Pay for Index Based Crop Insurance in Pakistan: A Case Study on Food and Cash Crops of Rain-fed Areas," Agricultural Economics Research Review, Agricultural Economics Research Association (India), vol. 26(2).
    7. Ming Wang & Tao Ye & Peijun Shi, 2016. "Factors Affecting Farmers’ Crop Insurance Participation in China," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 64(3), pages 479-492, September.
    8. Olivier Mahul, 1998. "Vers une redéfinition du rôle de l’assurance agricole dans la gestion des risques sur récoltes," Post-Print hal-01200910, HAL.
    9. John Quiggin & Robert G. Chambers, 2004. "Drought policy: a graphical analysis," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 48(2), pages 225-251, June.
    10. Anderson, Jock R., 2003. "Risk in rural development: challenges for managers and policy makers," Agricultural Systems, Elsevier, vol. 75(2-3), pages 161-197.
    11. Quiggin, John C. & Karagiannis, Giannis & Stanton, J., 1993. "Crop Insurance And Crop Production: An Empirical Study Of Moral Hazard And Adverse Selection," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 37(02), August.
    12. Raphael Nawrotzki & Fernando Riosmena & Lori Hunter, 2013. "Do Rainfall Deficits Predict U.S.-Bound Migration from Rural Mexico? Evidence from the Mexican Census," Population Research and Policy Review, Springer;Southern Demographic Association (SDA), vol. 32(1), pages 129-158, February.
    13. Sarris, Alexander, 2002. "The demand for commodity insurance by developing country agricultural producers - theory and an application to cocoa in Ghana," Policy Research Working Paper Series 2887, The World Bank.
    14. Patrlck, George F., 1988. "Mallee Wheat Farmers' Demand For Crop And Rainfall Insurance," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 32(01), April.
    15. Swenja Surminski & Paul Hudson & Jeroen Aerts & Wouter Botzen & M.Conceição Colaço & Florence Crick & Jill Eldridge & Anna Lorant & António Macedo & Reinhard Mechler & Carlos Neto & Robin Nicolai & Di, 2015. "Novel and improved insurance instruments for risk reduction," GRI Working Papers 188, Grantham Research Institute on Climate Change and the Environment.
    16. Olivier Mahul, 1998. "Vers une redéfinition du rôle de l’assurance agricole dans la gestion des risques sur récoltes," Cahiers d'Economie et Sociologie Rurales, INRA Department of Economics, vol. 49, pages 33-58.
    17. Leiva, Akssell J. & Skees, Jerry R., 2008. "Using Irrigation Insurance to Improve Water Usage of the Rio Mayo Irrigation System in Northwestern Mexico," World Development, Elsevier, vol. 36(12), pages 2663-2678, December.
    18. Hertzler, Greg, 2000. "The Precautionary Principle in Practice: How to Write a Call Option on the Environment," 2000 Conference (44th), January 23-25, 2000, Sydney, Australia 123660, Australian Agricultural and Resource Economics Society.
    19. Mafoua, Edouard, 2003. "Weather Insurance To Protect Specialty Crops Against Costs Of Irrigation In Drought Years," 2003 Annual meeting, July 27-30, Montreal, Canada 21922, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    20. Smith, Vincent H. & Chouinard, Hayley H. & Baquet, Alan E., 1994. "Almost Ideal Area Yield Crop Insurance Contracts," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 23(1), April.
    21. Fraser, Rob W., 1992. "An Analysis Of Willingness-To-Pay For Crop Insurance," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 36(01), April.
    22. Mahul, Olivier, 1998. "Vers une redéfinition du rôle de l’assurance agricole dans la gestion des risques sur récoltes," Cahiers d'Economie et de Sociologie Rurales (CESR), INRA (French National Institute for Agricultural Research), vol. 49.
    23. Antoine Leblois & Philippe Quirion, 2013. "Agricultural insurances based on meteorological indices: realizations, methods and research challenges," Post-Print hal-00656778, HAL.

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    Keywords

    Risk and Uncertainty;

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