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Valuing Agricultural Insurance
Author(s) -
Chambers Robert G.
Publication year - 2007
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.1467-8276.2007.00987.x
Subject(s) - economics , estimation , stochastic discount factor , econometrics , crop insurance , discounting , product (mathematics) , production (economics) , agriculture , actuarial science , microeconomics , mathematics , finance , capital asset pricing model , ecology , geometry , management , biology
This paper proposes a method for estimating a farmer's stochastic discount factor that is independent of his or her risk preferences, and shows that that stochastic discount factor is appropriate for calculating a farmer's willingness to pay for a crop insurance product. An empirical example illustrates how production and price data might be combined with returns data to permit econometric estimation of the stochastic discount factor, and the implications of those illustrative results are briefly discussed.