Weather index-based insurances for farmers in the North China Plain
Purpose - The purpose of this paper is to analyze the extent to which weather index-based insurances can contribute to reducing shortfall risks of revenues of a representative average farm that produces corn or wheat in the North China Plain (NCP). The geographical basis risk is quantified to analyze the spatial dependency of weather patterns between established weather stations in the area and locations where the local weather patterns are unknown. Design/methodology/approach - Data are based on the Findings - Results suggest significant differences in the potential risk reduction between corn and wheat when using insurance based on a precipitation index. The spatial analysis suggests a potential to expand the insurance around a reference weather station up to community level. Research limitations/implications - Findings are limited by a weak database in China and, in particular, by the unavailability of individual farm data. Moreover, the low density of weather stations currently limits the examination of the approach in a broader context. Practical implications - The risk reduction potential of the proposed insurance is encouraging. From a policy point of view, the approach used here can support the adjustment of insurers towards different crops. Originality/value - This paper is believed to be the first that investigates a weather index-based insurance designed for an average farm in the NCP and the quantification of geographical basis risk.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 71 (2011)
Issue (Month): 2 (August)
|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.:
- repec:eme:afrpps:v:66:y:2006:i:2:p:235-250 is not listed on IDEAS
- Debrah, Siegfried & Hall, Harry H., 1989. "Data aggregation and farm risk analysis," Agricultural Systems, Elsevier, vol. 31(3), pages 239-245.
- Martin Odening, 2007. "Analysis of rainfall derivatives using daily precipitation models: opportunities and pitfalls," Agricultural Finance Review, Emerald Group Publishing, vol. 67(1), pages 135-156, May.
- repec:eme:afrpps:v:65:y:2005:i:1:p:59-85 is not listed on IDEAS
- Skees, Jerry*Gober, Stephanie*Varangis, Panos*Le, 2001. "Developing rainfall-based index insurance in Morocco," Policy Research Working Paper Series 2577, The World Bank.
- Cooper, Joseph C. & Langemeier, Michael R. & Schnitkey, Gary D. & Zulauf, Carl R., 2009. "Constructing Farm Level Yield Densities from Aggregated Data: Analysis and Comparison of Approaches," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49216, Agricultural and Applied Economics Association.
- Daniele Simone Torriani, 2008. "Hedging with weather derivatives to cope with climate variability and change in grain maize production," Agricultural Finance Review, Emerald Group Publishing, vol. 68(1), pages 67-81, May.
- Turvey, Calum G., 2002. "Insuring Heat Related Risks In Agriculture With Degree-Day Weather Derivatives," 2002 Annual meeting, July 28-31, Long Beach, CA 19896, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
- Alan Ker & A. Tolga Ergun, 2007. "On the Revelation of Private Information in the U.S. Crop Insurance Program," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 74(4), pages 761-776.
- Richards, Timothy J. & Manfredo, Mark R. & Sanders, Dwight R., 2004. "Pricing Weather Derivatives," Working Papers 28536, Arizona State University, Morrison School of Agribusiness and Resource Management.
- Dwight R. Sanders, 2004. "Pricing Weather Derivatives," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(4), pages 1005-1017.
- Barry K. Goodwin, 2001. "Problems with Market Insurance in Agriculture," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(3), pages 643-649.
- Jerry R. Skees, 2008. "Challenges for use of index-based weather insurance in lower income countries," Agricultural Finance Review, Emerald Group Publishing, vol. 68(1), pages 197-217, May.
- Mark R. Manfredo & Raymond M. Leuthold, 1998. "Agricultural Applications of Value-at-Risk Analysis: A Perspective," Finance 9805002, EconWPA.
- Ernst Berg, 2008. "Weather-based instruments in the context of whole-farm risk management," Agricultural Finance Review, Emerald Group Publishing, vol. 68(1), pages 119-133, May.
- 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.
When requesting a correction, please mention this item's handle: RePEc:eme:afrpps:v:71:y:2011:i:2:p:218-239. 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.