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A Two-Stage Model Of The Demand For Specialty Crop Insurance

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  • Richards, Timothy J.

Abstract

Recent proposals to reform the federal Multiple-Peril Crop Insurance Program for specialty crops raised concerns that a higher cost for catastrophic-level coverage would significantly reduce program participation. This study estimates the demand for three levels of insurance coverage (50%, 65%, 75%) using aggregate data from grape production in 11 California counties from 1986-96. A discrete/continuous econometric model of the choice of coverage level and the amount of insurance finds that the price-elasticity of demand for 50% coverage is elastic, suggesting that premium increases may indeed reduce participation significantly. Such increases may also cause a significant reallocation of growers among coverage levels.

Suggested Citation

  • Richards, Timothy J., 2000. "A Two-Stage Model Of The Demand For Specialty Crop Insurance," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 25(01), July.
  • Handle: RePEc:ags:jlaare:30828
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    8. Niewuwoudt, W.L. & Bullock, J. Bruce, 1985. "The Demand for Crop Insurance," 1985 Conference, August 26-September 4, 1985, Málaga, Spain 183028, International Association of Agricultural Economists.
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    10. Barry K. Goodwin & Alan P. Ker, 1998. "Nonparametric Estimation of Crop Yield Distributions: Implications for Rating Group-Risk Crop Insurance Contracts," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 80(1), pages 139-153.
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    Cited by:

    1. Lee, Dong Won & Diersen, Matthew A. & Janssen, Larry & Gustafson, Cole R., 2006. "Premium Subsidy Changes and Demand for Crop Insurance," Proceedings: 2006 Agricultural and Rural Finance Markets in Transition, October 2-3, 2006; Washington, DC 133086, Regional Research Committee NC-1014: Agricultural and Rural Finance Markets in Transition.
    2. Olen, Beau & Wu, Junjie, 2013. "Supply of Insurance for Specialty Crops and its Effect on Yield and Acreage," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150787, Agricultural and Applied Economics Association.
    3. Robert Aidoo & James Osei Mensah & Prosper Wie & Dadson Awunyo-vitor, 2014. "Prospects of Crop Insurance as a Risk Management Tool among Arable Crop Farmers in Ghana," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 4(3), pages 341-354, March.
    4. M J Bhende, 2012. "Agricultural Insurance in India: Problems and Prospects," Working Papers id:4840, eSocialSciences.
    5. Richards, Timothy J. & Manfredo, Mark R., 2003. "Infrequent Shocks and Rating Revenue Insurance: A Contingent Claims Approach," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 28(02), August.
    6. Diao Panpan & Zhang Zhonggen, 2015. "Premium Rate Design and Risk Regionalization for the Policy-Based Wheat Insurance of Henan Province in China," Asia-Pacific Journal of Risk and Insurance, De Gruyter, vol. 9(2), pages 203-229, July.
    7. Woodard, Joshua, 2016. "Estimation of Insurance Deductible Demand under Endogenous Premium Rates," 2016 Annual Meeting, July 31-August 2, 2016, Boston, Massachusetts 236151, Agricultural and Applied Economics Association.
    8. Yi, Jing & Richardson, James & Bryant, Henry, 2016. "How Do Premium Subsidies Affect Crop Insurance Demand at Different Coverage Levels: the Case of Corn," 2016 Annual Meeting, July 31-August 2, 2016, Boston, Massachusetts 236249, Agricultural and Applied Economics Association.
    9. repec:kap:expeco:v:20:y:2017:i:4:d:10.1007_s10683-017-9513-8 is not listed on IDEAS

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    Keywords

    Risk and Uncertainty;

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