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General Equilibrium Modelling of the Insurance Industry: U.S. Crop Insurance

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  • Alexandre Gohin

Abstract

The U.S. farm policy has progressively changed in recent years, with greater reliance on subsidized crop insurance programs in the place of fixed direct payments. Despite the use of such insurance over a long period of time, quantitative macroeconomic assessments of insurance programs are lacking. We develop an original stochastic computable general equilibrium framework where we isolate the coverage effects provided by subsidized insurance programs. We find that their welfare effects are dramatically modified once we recognize their risk sharing properties. Our simulated market effects on the U.S. cereal markets are consistent with currently available microeconometric evidence.

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  • Alexandre Gohin, 2019. "General Equilibrium Modelling of the Insurance Industry: U.S. Crop Insurance," Journal of Global Economic Analysis, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University, vol. 4(2), pages 108-145, December.
    • Handle: RePEc:gta:jnlgea:v:4:y:2019:i:2:p:108-145
    DOI: http://dx.doi.org/10.21642/JGEA.040203AF
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