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Almost Ideal Area Yield Crop Insurance Contracts

  • Smith, Vincent H.
  • Chouinard, Hayley H.
  • Baquet, Alan E.

Using yield data for a sample of 123 dryland wheat producers in Montana, the effects of three area yield contracts, including the contract currently offered by the United States Federal Crop Insurance Corporation and two individual yield contracts on individual farm yield variability, are examined. The results indicate that while the Federal Crop Insurance Corporation area yield contract provides all farmers in the sample with some protection against yield variability, a simpler, actuarially equivalent "almost ideal" area yield contract provides substantially larger reductions in yield variability. However, actuarially equivalent individual yield contracts provide levels of protection against yield variability similar to those obtained under the "almost ideal" area yield contract at much lower premiums.

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File URL: http://purl.umn.edu/31315
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Article provided by Northeastern Agricultural and Resource Economics Association in its journal Agricultural and Resource Economics Review.

Volume (Year): 23 (1994)
Issue (Month): 1 (April)
Pages:

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Handle: RePEc:ags:arerjl:31315
Contact details of provider: Web page: http://www.narea.org/
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  1. Quiggin, John C., 1986. "A Note On The Viability Of Rainfall Insurance," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 30(01), April.
  2. Arnott, Richard J & Stiglitz, Joseph E, 1988. " The Basic Analytics of Moral Hazard," Scandinavian Journal of Economics, Wiley Blackwell, vol. 90(3), pages 383-413.
  3. 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.
  4. 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.
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