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Some Simulation Results for a Green Insurance Mechanism

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  • Baerenklau, Kenneth A.

Abstract

This analysis extends previous work on green insurance by proposing a mechanism that offers a stronger adoption incentive and is applicable to heterogeneous populations and non-binary adoption decisions. Endogenous learning about the new technology is incorporated, and empirically calibrated simulation results are presented for the case of reduced-phosphorus dairy diets. Results show that the mechanism has a significant impact on behavior and may incur no net cost for the regulator when an insurance premium is charged. Conditions under which a green payment mechanism may be preferable to green insurance also are discussed.

Suggested Citation

  • Baerenklau, Kenneth A., 2005. "Some Simulation Results for a Green Insurance Mechanism," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 30(01), April.
  • Handle: RePEc:ags:jlaare:30787
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    File URL: http://purl.umn.edu/30787
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    References listed on IDEAS

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    1. Jerry R. Skees & J. Roy Black & Barry J. Barnett, 1997. "Designing and Rating an Area Yield Crop Insurance Contract," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(2), pages 430-438.
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    3. Murat Isik & Madhu Khanna, 2003. "Stochastic Technology, Risk Preferences, and Adoption of Site-Specific Technologies," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(2), pages 305-317.
    4. Golan, Amos & Judge, George G. & Miller, Douglas, 1996. "Maximum Entropy Econometrics," Staff General Research Papers Archive 1488, Iowa State University, Department of Economics.
    5. Subal C. Kumbhakar, 2002. "Specification and Estimation of Production Risk, Risk Preferences and Technical Efficiency," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 84(1), pages 8-22.
    6. Kenneth A. Baerenklau, 2005. "Toward an Understanding of Technology Adoption: Risk, Learning, and Neighborhood Effects," Land Economics, University of Wisconsin Press, vol. 81(1).
    7. Olivier Mahul, 1999. "Optimum Area Yield Crop Insurance," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(1), pages 75-82.
    8. Golan, Amos & Judge, George & Karp, Larry, 1996. "A maximum entropy approach to estimation and inference in dynamic models or Counting fish in the sea using maximum entropy," Journal of Economic Dynamics and Control, Elsevier, vol. 20(4), pages 559-582, April.
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