IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Estimation of crop yield distribution and Insurance Premium using Shrinkage Estimator: A Hierarchical Bayes and Small Area Estimation Approach

Listed author(s):
  • Awondo, Sebastain Nde
  • Datta, Gauri S.
  • Ramirez, Octavio A.
  • Fonsah, Esendugue Greg

Obtaining reliable estimates of insurance premiums is a critical step in risk sharing and risk transfer necessary to ensure solvency and continuity in crop insurance programs. Challenges encountered in the estimation include dealing with aggregation bias from using county level yield averages as well as properly accounting for spatial and temporal heterogeneity. In this study, we associate some of these challenges as classical small area estimation (SAE) problems. We employ a hierarchical Bayes (HB) SAE to obtain design consistent expected county level yields and Group Risk Plan (GRP) premiums for corm farms in Illinois using quasi-simulated data. Preliminary results show little bias (< 10%) in estimated expected county yields in several counties investigated. We found wide variation in GRP, APH and basis risk across counties for similar level of coverage and scale. Results show that farmers could lower their GRP premiums by as much as 30% by carefully choosing a coverage level and scale combination.

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.

File URL:
Download Restriction: no

Paper provided by Agricultural and Applied Economics Association in its series 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington with number 126778.

in new window

Date of creation: 2012
Handle: RePEc:ags:aaea12:126778
Contact details of provider: Postal:
555 East Wells Street, Suite 1100, Milwaukee, Wisconsin 53202

Phone: (414) 918-3190
Fax: (414) 276-3349
Web page:

More information through EDIRC

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.:

in new window

  1. Alan P. Ker & Keith Coble, 2003. "Modeling Conditional Yield Densities," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(2), pages 291-304.
  2. Wolfram Schlenker & W. Michael Hanemann & Anthony C. Fisher, 2006. "The Impact of Global Warming on U.S. Agriculture: An Econometric Analysis of Optimal Growing Conditions," The Review of Economics and Statistics, MIT Press, vol. 88(1), pages 113-125, February.
  3. Ozaki, Vitor Augusto & Ghosh, Sujit K. & Goodwin, Barry K. & Shirota, Ricardo, 2005. "Spatio-Temporal Modeling Of Agricultural Yield Data With An Application To Pricing Crop Insurance Contracts," 2005 Annual meeting, July 24-27, Providence, RI 19142, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  4. Bruce J. Sherrick & Fabio C. Zanini & Gary D. Schnitkey & Scott H. Irwin, 2004. "Crop Insurance Valuation under Alternative Yield Distributions," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(2), pages 406-419.
  5. Sukant K. Misra & Jeannie Nelson, 2003. "Efficient Estimation of Agricultural Time Series Models with Nonnormal Dependent Variables," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(4), pages 1029-1040.
  6. Ramirez, Octavio A. & Carpio, Carlos E., 2011. "Premium Estimation Inaccuracy and the Actuarial Performance of the US Crop Insurance Program," 2011 Annual Meeting, July 24-26, 2011, Pittsburgh, Pennsylvania 102463, Agricultural and Applied Economics Association.
  7. Richard E. Just & Rulon D. Pope, 1999. "Implications of Heterogeneity for Theory and Practice in Production Economics," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(3), pages 711-718.
  8. Ramirez, Octavio A. & McDonald, Tanya U. & Carpio, Carlos E., 2010. "A Flexible Parametric Family for the Modeling and Simulation of Yield Distributions," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 42(02), May.
  9. Roger Claassen & Richard E. Just, 2010. "Heterogeneity and Distributional Form of Farm-Level Yields," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 93(1), pages 144-160.
  10. Octavio A. Ramírez, 1997. "Estimation and Use of a Multivariate Parametric Model for Simulating Heteroskedastic, Correlated, Nonnormal Random Variables: The Case of Corn Belt Corn, Soybean, and Wheat Yields," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(1), pages 191-205.
  11. Ramirez, Octavio & Colson, Greg, 2013. "Premium Estimation Inaccuracy and the Distribution of Crop Insurance Subsidies," SCC-76 Meeting, March 14-16, 2013, Pensacola, Florida 152130, SCC-76: Economics and Management of Risk in Agriculture and Natural Resources.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:ags:aaea12:126778. 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: (AgEcon Search)

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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.