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Crop Insurance Valuation under Alternative Yield Distributions
Author(s) -
Sherrick Bruce J.,
Zanini Fabio C.,
Schnitkey Gary D.,
Irwin Scott H.
Publication year - 2004
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.1111/j.0092-5853.2004.00587.x
Subject(s) - crop insurance , valuation (finance) , yield (engineering) , economics , distribution (mathematics) , crop yield , crop , actuarial science , econometrics , agricultural economics , mathematics , agriculture , agronomy , finance , geography , mathematical analysis , materials science , archaeology , biology , metallurgy
Considerable disagreement exists about the most appropriate characterization of farm‐level yield distributions. Yet, the economic importance of alternative yield distribution specifications on crop insurance valuation has not been well documented. The results of this study demonstrate that large differences in expected payouts from popular crop insurance products can arise solely from the parameterization chosen to represent yield distributions. The results suggest that the frequently unexamined yield distribution specification may lead to economically significant errors in crop insurance policy rating and assessment of expected payouts from policies.