The Demand for Multiple Peril Crop Insurance: Evidence from Montana Wheat Farms
An econometric analysis of the demand for multiple peril crop insurance is carried out for a sample of 370 Montana wheat farms. The study is the first to model the farm's participation and coverage-level decisions separately through Heckman two-stage estimation procedures. These decisions are shown to be determined in different ways. In addition, farms with positive expected returns from insurance make coverage-level decisions in different ways from farms with negative expected returns. These differences indicate that adverse selection effects limit the efficacy of across-the-board premium rate increases as mechanisms for reducing loss ratios. Copyright 1996, Oxford University Press.
Volume (Year): 78 (1996)
Issue (Month): 1 ()
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