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Author: H. Holly Wang Publisher: ISBN: Category : Languages : en Pages : 0
Book Description
The performance of individual farm yield and area yield crop insurance programs is evaluated for a representative Iowa corn farm using numerical optimization of expected utility and simulation techniques. Several different contract design features are studied, including the nature of the yield index which triggers insurance payouts, alternative restrictions on coverage levels, and alternative pricing structures. Performance is evaluated in terms of impacts on farmer participation and welfare and is examined in a portfolio setting where futures and options are also available to farmers. The relative performance of different crop insurance designs is found to be particularly sensitive to restrictions on coverage levels, the size of premium loadings, and the degree to which individual farm yields are correlated with area yields.
Author: H. Holly Wang Publisher: ISBN: Category : Languages : en Pages : 0
Book Description
The performance of individual farm yield and area yield crop insurance programs is evaluated for a representative Iowa corn farm using numerical optimization of expected utility and simulation techniques. Several different contract design features are studied, including the nature of the yield index which triggers insurance payouts, alternative restrictions on coverage levels, and alternative pricing structures. Performance is evaluated in terms of impacts on farmer participation and welfare and is examined in a portfolio setting where futures and options are also available to farmers. The relative performance of different crop insurance designs is found to be particularly sensitive to restrictions on coverage levels, the size of premium loadings, and the degree to which individual farm yields are correlated with area yields.
Author: Richard E. Just Publisher: Springer Science & Business Media ISBN: 9780792375678 Category : Business & Economics Languages : en Pages : 608
Book Description
After all the research on agricultural risk to date, the treatment of risk in agricultural research is far from harmonious. Many competing risk models have been proposed. Some new methodologies are largely untested. Some of the leading empirical methodologies in agricultural economic research are poorly suited for problems with aggregate data where risk averse behavior is less likely to be important. This book is intended to (i) define the current state of the literature on agricultural risk research, (ii) provide a critical evaluation of economic risk research on agriculture to date and (iii) set a research agenda that will meet future needs and prospects. This type of research promises to become of increasing importance because agricultural policy in the United States and elsewhere has decidedly shifted from explicit income support objectives to risk-related motivations of helping farmers deal with risk. Beginning with the 1996 Farm Bill, the primary set of policy instruments from U.S. agriculture has shifted from target prices and set aside acreage to agricultural crop insurance. Because this book is intended to have specific implications for U.S. agricultural policy, it has a decidedly domestic scope, but clearly many of the issues have application abroad. For each of the papers and topics included in this volume, individuals have been selected to give the strongest and broadest possible treatment of each facet of the problem. The result is this comprehensive reference book on the economics of agricultural risk.
Author: Darrell L. Hueth Publisher: Springer Science & Business Media ISBN: 9401113866 Category : Business & Economics Languages : en Pages : 385
Book Description
Government subsidized crop insurance has been used by a number of developed countries as a mechanism to reduce farm income instability by reducing yield risks. This book provides an in-depth analysis and evaluation of government provided crop insurance in developed countries. The book is organized into three sections: Part one presents background material on crop insurance programs in the U.S., Canada and selected other countries. Part two provides some analytical models of multiple peril crop insurance which suggest the possibility of modification of design which could improve performance and which explores theoretical linkages between crop insurance decisions and other producer decisions previously not analyzed. The main part of the book is Part three, where the results of a series of empirical studies using databases particularly designed to answer crop insurance questions are presented. This part of the book tests a number of the hypotheses which were raised in Parts one and two regarding reasons for the view widely held by economists that crop insurance has not functioned well.
Author: Charalampos Mavroutsikos Publisher: ISBN: 9781392617571 Category : Crop insurance Languages : en Pages : 0
Book Description
This dissertation develops a novel theoretical framework of heterogeneous producers to analyze the system-wide market and welfare effects of crop insurance and the determinants of the optimal policy design under alterative information structures and government policy objectives. The framework captures the empirically relevant differences in producer attitudes towards risk and their impact on crop insurance participation under different insurance contracts and premium subsidies. The explicit consideration of producer heterogeneity enables also the proper identification and disaggregation of the distributional impacts of crop insurance, and the evaluation of the role of multiple contracts and premium subsidies in policy design. Analytical results indicate that producer welfare gains from crop insurance increase with the level of producer risk aversion and insurance coverage. The provision of different crop insurance contracts results in a separating equilibrium, where different producer groups choose different contracts. The disaggregated welfare impacts of changes in contract availability are determined by the relative differences in premium rates and reduction in risk exposure among the insurance options. Changes in premium subsidies are shown to cause contract-specific participation and welfare changes, with asymmetric benefits for the different policy participants. Regarding the optimal policy design, the study identifies (a) the determinants of the optimal level of premium subsidies and (b) their role in coping with informational asymmetries, under different objectives and political preferences of the government. The analysis shows how premium subsidies can be utilized to induce producer behavior leading to a desired separating equilibrium and presents an alternative policy design that can more efficiently achieve the government objective of increased producer participation in crop insurance. Finally, by utilizing highly detailed crop insurance data, the study empirically tests and quantifies the system-wide effects of crop insurance, the impact of premium subsidies on participants' welfare, and identifies crop and regional differences. Empirical results are consistent with/support the theoretical findings indicating that producer benefits from crop insurance increase with the level of producer risk aversion, high coverage and regional riskiness. The change in the magnitude of premium subsidies in 2000 resulted in increased producer welfare and spatial differences in private insurers' returns.
Author: Jialing Yu Publisher: ISBN: Category : Agricultural subsidies Languages : en Pages : 90
Book Description
The publicly subsidized Federal Crop Insurance Program has expanded rapidly in recent decades in the United States. With the reform in the 2014 Farm Bill, the Federal Crop Insurance Program has become the most important component of U.S. farm policies. The primary goal of the program is to provide risk protections for farmers. However, there is sporadic evidence of welfare costs associated with the program due to moral hazard, adverse selection, deadweight loss from the subsidy transfer and transaction costs. To provide a complete and systematic assessment, it requires a thorough theoretical understandings and credible empirical measurement of the welfare effect of the Federal Crop Insurance Program. We apply the sufficient statistics approach to consolidate various welfare effects of crop insurance and to provide quantitative evidence for the welfare analysis. We analyze a model in a setting where information asymmetry and systemic risk form an adverse environment for private sectors to provide insurance and therefore create a need for government intervention. From the model, we derive the condition for optimal contract and identify key parameters that affect the welfare effects of risk protection, information asymmetry, and premium subsidy. The results not only provide policy implications and but also suggest the key parameters needed for measuring the welfare effect of publically provided crop insurance programs empirically. To measure the welfare effect of the Federal Crop Insurance Program, we need to understand how the program affects the distribution of revenue. To this end, a moment-based approach is used to estimate the reduced-form equations of the first two moments of revenue distributions using farm-level Agricultural Census data from the U.S. Heartland region for 2002, 2007 and 2012. The control function approach is applied to control for the endogeneity problem caused by the self-selection of insurance coverage, under the assumption that selection into different coverage level is based on a set of observed covariates and time-invariant factors. Our results show that increase in coverage level is associated with a lower mean and higher variability of farm revenue per acre. The impacts of insurance coverage on the revenue distribution, as a reduced-form representation of the moral hazard, suggest a welfare loss. Other key parameters affecting marginal welfare effects of the Federal Crop Insurance Program include risk attitude parameters, insurance demand elasticity with respect to price, the impacts of insurance coverage on the production outcomes, marginal welfare cost of deadweight loss, and loading factors. We collect the information on the range of the values of these parameters from existing literatures. The Bootstrap method is applied to estimate marginal welfare effects discussed in the conceptual model. The results suggest that under the current policy setting, the net marginal welfare effects of coverage level and subsidy rate are both negative, suggesting that both the coverage level and the subsidy rate are greater than their optimal level. However, from farmers’ perspectives, the current risk protection level is appropriate.
Author: Barry K. Goodwin Publisher: American Enterprise Institute ISBN: 9780844739083 Category : Business & Economics Languages : en Pages : 178
Book Description
This study is the first to provide a comprehensive and in-depth economic analysis of the origins and consequences of U.S. crop insurance and disaster relief programs. The authors investigate the policy options for disaster assistance and crop insurance, beginning with the recognition that current policies are unsatisfactory.
Author: Alexa B. Verderosa Publisher: ISBN: 9781536152746 Category : Crop insurance Languages : en Pages : 263
Book Description
Since its inception in 1938, the program has evolved from an ancillary program with low participation to a central pillar of federal support for agriculture. As the program has grownin types of insurance policies, breadth of crops covered, and millions of acres enrolledso has the cost of the program to the federal government. The first two chapters provide an overview of the federal crop insurance program. Chapter 3 focuses entirely on delivery subsides and explains how delivery subsidies are calculated, the limitations of publicly available data on the actual delivery expenses of Approved Insurance Providers (AIPs), and how AIPs spend delivery subsidies. In 2010, USDA negotiated an agreement with insurance companies to set a national cap on the annual payments it makes to them for expenses and a target rate of return. Chapter 4 examines (1) the changes in expense payments to companies due to the cap, (2) the extent to which the programs target rate of return reflects market conditions, and (3) opportunities for the federal government to reduce its delivery costs for the program. Before the Agricultural Act of 2014 cotton was eligible for most Federal farm programs. The 2014 Farm Act eliminated multiple programs, including the Direct and Countercyclical Program, while introducing several new programs, including the Supplemental Coverage Option (SCO), and Stacked Income Protection Plan (STAX). Chapter 5 focuses on the two new programs for cotton and examines the mechanics of the programs and their revenue impacts. Catastrophic coverage for noninsurable crops, known as the Noninsured Crop Disaster Assistance Program (NAP), has been available since the Federal Crop Insurance Reform Act of 1994. Chapter 6 examines the effects of the 2014 NAP policy change. Crop insurance premium subsidies are an important part of Compliance incentives under the 2014 Act. Farm program benefits under the 2014 Act could be as high or higher than under the 2008 Farm Act; but for individual farms, the shift toward a crop insurance-oriented policy could increase or decrease Compliance incentives as reported in the last chapter.
Author: H. Holly Wang
Author: H. Holly Wang
Author: United States. General Accounting Office
Author: Richard E. Just
Author: Darrell L. Hueth
Author: Linda Calvin
Author: Charalampos Mavroutsikos
Author: Warren R. Bailey
Author: Jialing Yu
Author: Barry K. Goodwin
Author: Alexa B. Verderosa