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Evaluating Policy Design Choices for the Margin Protection Program for Dairy Producers: An Expected Indemnity Approach
Author(s) -
Newton John,
Thraen Cameron S.,
Bozic Marin
Publication year - 2016
Publication title -
applied economic perspectives and policy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.4
H-Index - 49
eISSN - 2040-5804
pISSN - 2040-5790
DOI - 10.1093/aepp/ppv033
Subject(s) - indemnity , subsidy , margin (machine learning) , revenue , crop insurance , gross margin , farm programs , business , production (economics) , payment , agricultural economics , agricultural policy , product (mathematics) , economics , agriculture , finance , actuarial science , microeconomics , ecology , geometry , mathematics , machine learning , computer science , market economy , biology
The Agricultural Act of 2014 replaced dairy product price supports and countercyclical income support payments with the Margin Protection Program for Dairy Producers. Using farm‐level data, producer decisions and aggregate policy costs under a variety of risk environments and policy design alternatives are simulated. Fixed premium rates may result in budget outlays that are substantially higher than for equivalent variable‐rate insurance subsidized at levels observed in revenue‐based crop insurance policies. Due to the absence of adjusted gross income or production eligibility constraints, a significant portion of benefits may accrue to a small share of large dairy farms.