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Nutrient Best Management Practice Insurance and Farmer Perceptions of Adoption Risk

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  • Mitchell, Paul D.

Abstract

This paper explores the effect farmer perceptions concerning how best management practice (BMP) adoption changes the profit distribution have on BMP adoption incentives and the potential for insurance to increase these incentives. Adoption indifference curves illustrate the effect of farmer perceptions on BMP adoption incentives and the potential for insurance to expand the set of perceptions consistent with adoption. Empirical analysis quantifies these conceptual results for nutrient BMP insurance, a new policy available to corn farmers as part of a USDA-Risk Management Agency pilot program in four states. Results indicate that nutrient BMP insurance can have economically relevant effects on farmer adoption incentives.

Suggested Citation

  • Mitchell, Paul D., 2004. "Nutrient Best Management Practice Insurance and Farmer Perceptions of Adoption Risk," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 36(03), December.
  • Handle: RePEc:ags:joaaec:43460
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    References listed on IDEAS

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    1. Bruce A. Babcock & Chad E. Hart & Dermot J. Hayes, 2004. "Actuarial Fairness of Crop Insurance Rates with Constant Rate Relativities," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(3), pages 563-575.
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    3. Babcock, Bruce A. & Choi, E. Kwan & Feinerman, Eli, 1993. "Risk And Probability Premiums For Cara Utility Functions," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 18(01), July.
    4. David A. Hennessy & Bruce A. Babcock & Dermot J. Hayes, 1997. "Budgetary and Producer Welfare Effects of Revenue Insurance," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(3), pages 1024-1034.
    5. Babcock, Bruce A. & Blackmer, Alfred M., 1992. "The Value Of Reducing Temporal Input Nonuniformities," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 17(02), December.
    6. Fraser, R. W. & Lekakis, J. N., 2003. "Risk Management and the Environment: Agriculture in Perspective," Staff General Research Papers Archive 10594, Iowa State University, Department of Economics.
    7. Feather, Peter & Cooper, Joseph C., 1995. "Voluntary Incentives for Reducing Agricultural Nonpoint Source Water Pollution," Agricultural Information Bulletins 33619, United States Department of Agriculture, Economic Research Service.
    8. Hrubovcak, James & Vasavada, Utpal & Aldy, Joseph E., 1999. "Green Technologies for a More Sustainable Agriculture," Agricultural Information Bulletins 33721, United States Department of Agriculture, Economic Research Service.
    9. David A. Hennessy & Bruce A. Babcock & Dermot J. Hayes, 1997. "Budgetary and Producer Welfare Effects of Revenue Insurance," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(3), pages 1024-1034.
    10. Huang, Wen-Yuan, 2002. "Using Insurance to Enhance Nitrogen Fertilizer Application Timing to Reduce Nitrogen Losses," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 34(01), pages 131-148, April.
    11. Mitchell, Paul D. & Hennessy, David A., 2003. "Factors Determining Best Management Practice Adoption Incentives and the Impact of Green Insurance," Staff General Research Papers Archive 10418, Iowa State University, Department of Economics.
    12. Huang, Wen-Yuan, 2002. "Using Insurance To Enhance Nitrogen Fertilizer Application Timing To Reduce Nitrogen Losses," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 34(01), April.
    13. Meyer, Jack, 1987. "Two-moment Decision Models and Expected Utility Maximization," American Economic Review, American Economic Association, vol. 77(3), pages 421-430, June.
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    Cited by:

    1. Xiaodong Du & David A. Hennessy & Cindy L. Yu, 2012. "Testing Day's Conjecture that More Nitrogen Decreases Crop Yield Skewness," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 94(1), pages 225-237.
    2. Tipparat Pongthanapanich & Eva Roth, 2006. "Toward Environmental Responsibility of Thai Shrimp Farming through a Voluntary Management Scheme," Working Papers 70/2006, University of Southern Denmark, Department of Sociology, Environmental and Business Economics.
    3. Harris, Leah M. & Swinton, Scott M. & Shupp, Robert S., 2014. "Experimental auctions to evaluate incentives for cost-effective agricultural phosphorus abatement in the Great Lakes," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 170287, Agricultural and Applied Economics Association.

    More about this item

    Keywords

    adoption indifference curves; crop insurance; fertilizer; green insurance; D8; Q12; Q16; Q21;

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • Q16 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - R&D; Agricultural Technology; Biofuels; Agricultural Extension Services
    • Q21 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Demand and Supply; Prices

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