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Some Simulation Results for a Green Insurance Mechanism

  • Baerenklau, Kenneth A.
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    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.

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    Article provided by Western Agricultural Economics Association in its journal Journal of Agricultural and Resource Economics.

    Volume (Year): 30 (2005)
    Issue (Month): 01 (April)

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    Handle: RePEc:ags:jlaare:30787
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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.
    2. 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.
    3. 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.
    4. Kaplan, Jonathan D. & Howitt, Richard E. & Farzin, Y. Hossein, 2003. "An information-theoretical analysis of budget-constrained nonpoint source pollution control," Journal of Environmental Economics and Management, Elsevier, vol. 46(1), pages 106-130, July.
    5. Olivier Mahul, 1999. "Optimum Area Yield Crop Insurance," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(1), pages 75-82.
    6. Golan, Amos & Judge, George G. & Miller, Douglas, 1996. "Maximum Entropy Econometrics," Staff General Research Papers 1488, Iowa State University, Department of Economics.
    7. 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.
    8. Kenneth A. Baerenklau, 2005. "Toward an Understanding of Technology Adoption: Risk, Learning, and Neighborhood Effects," Land Economics, University of Wisconsin Press, vol. 81(1).
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