Spatial producer heterogeneity in crop insurance product decisions within major corn producing states
Purpose - The purpose of this paper is to examine the spatial components of producer heterogeneity in crop insurance product selection among US corn producers and identifies neighborhood spillover or agent marketing effects in these decisions. Design/methodology/approach - County-level insurance and yield data are used to demonstrate that a gradual shift from yield-based insurance to revenue-based insurance has spatial patterns. Conventional risk variables such as yield variability, price variability, prevalence of irrigation, other crops, and yield-price relationships play an important role in this shift and are consistently estimated only when spatial components are included. A spatial random effects model is used to also identify the impact of spatial lag effects, which include neighborhood spillover and agent marketing effects, on the share of corn acres insured with revenue-based plans vs yield-based plans. Findings - Theoretically consistent variables associated with risk are found to significantly influence the choice between crop revenue and yield insurance. Non-linear parameters identify the region-specific effects from changes in irrigation, yield price correlation, and the prevalence of corn production on insurance decisions. In addition, spatial components such as the decisions made by nearby producers and marketing drives are also found to influence decisions. These results may demonstrate the relative influence of trusted sources, such as nearby producers and insurance agents, on insurance decisions. Originality/value - Traditional risk variables are consistently estimated by controlling for spatial heterogeneity. This study also reveals the propensity of producers to rely on the opinions of other producers or agents that they know.
Volume (Year): 70 (2010)
Issue (Month): 1 (May)
|Contact details of provider:|| Web page: http://www.emeraldinsight.com|
|Order Information:|| Postal: Emerald Group Publishing, Howard House, Wagon Lane, Bingley, BD16 1WA, UK|
Web: http://emeraldgrouppublishing.com/products/journals/journals.htm?id=afr Email:
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Shaik, Saleem & Coble, Keith H. & Knight, Thomas O. & Baquet, Alan E. & Patrick, George F., 2008.
"Crop Revenue and Yield Insurance Demand: A Subjective Probability Approach,"
Journal of Agricultural and Applied Economics,
Cambridge University Press, vol. 40(03), pages 757-766, December.
- Shaik, Saleem & Coble, Keith H. & Knight, Thomas O. & Baquet, Alan E. & Patrick, George F., 2008. "Crop Revenue and Yield Insurance Demand: A Subjective Probability Approach," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 40(03), December.
- Harwood, Joy L. & Heifner, Richard G. & Coble, Keith H. & Perry, Janet E. & Somwaru, Agapi, 1999. "Managing Risk in Farming: Concepts, Research, and Analysis," Agricultural Economics Reports 34081, United States Department of Agriculture, Economic Research Service.
- Mueller, Julie M. & Loomis, John B., 2008. "Spatial Dependence in Hedonic Property Models: Do Different Corrections For Spatial Dependence Result in Economically Significant Differences in Estimated Implicit Prices?," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 33(2), August.
- Brian Wansink, 2003. "Farmers' Preferences for Crop Insurance Attributes," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 25(2), pages 415-429.
- Vedenov, Dmitry V. & Power, Gabriel J., 2008. "Risk-Reducing Effectiveness of Revenue versus Yield Insurance in the Presence of Government Payments," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 40(02), August.
- Vedenov, Dmitry V. & Power, Gabriel J., 2008. "Risk-Reducing Effectiveness of Revenue versus Yield Insurance in the Presence of Government Payments," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 40(02), pages 443-459, August.
- Swamy, P A V B & Arora, S S, 1972. "The Exact Finite Sample Properties of the Estimators of Coefficients in the Error Components Regression Models," Econometrica, Econometric Society, vol. 40(2), pages 261-275, March.
- Keith H. Coble & Thomas O. Knight & Rulon D. Pope & Jeffery R. Williams, 1996. "Modeling Farm-Level Crop Insurance Demand with Panel Data," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(2), pages 439-447.
- T. S. Breusch & A. R. Pagan, 1980. "The Lagrange Multiplier Test and its Applications to Model Specification in Econometrics," Review of Economic Studies, Oxford University Press, vol. 47(1), pages 239-253.
- Breusch, T.S. & Pagan, A.R., "undated". "The Lagrange multiplier test and its applications to model specification in econometrics," CORE Discussion Papers RP 412, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Shiva S. Makki & Agapi Somwaru, 2001. "Farmers' Participation in Crop Insurance Markets: Creating the Right Incentives," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(3), pages 662-667.
- Barry K. Goodwin & Monte L. Vandeveer & John L. Deal, 2004. "An Empirical Analysis of Acreage Effects of Participation in the Federal Crop Insurance Program," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(4), pages 1058-1077. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:eme:afrpps:v:70:y:2010:i:1:p:66-78. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Virginia Chapman)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.