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Toward a Theory of Agricultural Insurance
Author(s) -
Ahsan Syed M.,
Ali Ali A. G.,
Kurian N. John
Publication year - 1982
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 - 10.2307/1240644
Subject(s) - crop insurance , insurance policy , risk pool , key person insurance , auto insurance risk selection , business , agency (philosophy) , casualty insurance , general insurance , agriculture , actuarial science , imperfect , economics , public economics , epistemology , biology , ecology , philosophy , linguistics
Abstract In this paper we develop a theory of crop insurance. We start by reaffirming the risk‐spreading role of competitive crop insurance markets. It is argued, however, that once the problems of imperfect information are recognized, a competitive crop insurance market may not exist at all. Two candidates present themselves. First is market insurance with the public sector as a source of (costly) information gathering and dissemination, and second, is the direct provision of crop insurance by the public sector. We focus on the latter and develop a model of public insurance as a decentralized plan where the farmer determines factor utilization taking the insurance contract as given. In turn, the insurance agency, taking factor utilization as determined by the farmer, chooses the optimal contract so as to maximize the value of aggregate output in the economy.