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Performance of Farm Level Vs Area Level Crop Insurance

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  • Awondo, S.
  • Datta, G.

Abstract

This study investigated the performance of Actual Production History (APH), a farm level crop insurance plan, vis- a-vis Area Yield Production (AYP), an area level crop insurance, as a farm risk management tool. We estimated actuarially fair premiums and trigger probabilities under both plans using a two-step hierarchical Bayes small area estimator. Certainty equivalent revenues based on a risk averse utility function were derived under three insurance choice scenario (APH, AYP, no insurance) with and without actual Federal subsidies. Finally, we derived the performance of each alternative plan with regards to the other following a pair-wise comparison of certainty equivalent revenues. Results suggest that unobserved factors other than basis risk and farmers risk preference drive preferences for crop insurance contracts. Acknowledgement :

Suggested Citation

  • Awondo, S. & Datta, G., 2018. "Performance of Farm Level Vs Area Level Crop Insurance," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277265, International Association of Agricultural Economists.
    • Handle: RePEc:ags:iaae18:277265
    DOI: 10.22004/ag.econ.277265
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    File URL: https://ageconsearch.umn.edu/record/277265/files/1504.pdf
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    References listed on IDEAS

    as
    1. Awondo, Sebastain Nde & Datta, Gauri S. & Ramirez, Octavio A. & Fonsah, Esendugue Greg, 2012. "Estimation of crop yield distribution and Insurance Premium using Shrinkage Estimator: A Hierarchical Bayes and Small Area Estimation Approach," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 126778, Agricultural and Applied Economics Association.
    2. Sebastain N. Awondo & Octavio A. Ramirez & Gauri S. Datta & Gregory Colson & Esendugue G. Fonsah, 2018. "Estimation of Crop Yields and Insurance Premiums Using a Shrinkage Estimator," North American Actuarial Journal, Taylor & Francis Journals, vol. 22(2), pages 289-308, April.
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    Cited by:

    1. Xuche Gong & David A. Hennessy & Hongli Feng, 2023. "Systemic risk, relative subsidy rates, and area yield insurance choice," American Journal of Agricultural Economics, John Wiley & Sons, vol. 105(3), pages 888-913, May.

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      Keywords

      Risk and Uncertainty;

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