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The Demand for Multiple Peril Crop Insurance: Evidence from Montana Wheat Farms

  • Vincent H. Smith
  • Alan E. Baquet
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    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.

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    Article provided by Agricultural and Applied Economics Association in its journal American Journal of Agricultural Economics.

    Volume (Year): 78 (1996)
    Issue (Month): 1 ()
    Pages: 189-201

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    Handle: RePEc:oup:ajagec:v:78:y:1996:i:1:p:189-201
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