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The Effects of Crop Yield Insurance Designs on Farmer Participation and Welfare
Author(s) -
Wang H. Holly,
Hanson Steven D.,
Myers Robert J.,
Black J. Roy
Publication year - 1998
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 - 10.2307/1244065
Subject(s) - crop insurance , futures contract , yield (engineering) , portfolio , welfare , index (typography) , economics , agricultural economics , crop , actuarial science , agricultural science , econometrics , business , agriculture , environmental science , agronomy , financial economics , computer science , geography , market economy , materials science , biology , world wide web , metallurgy , archaeology
Abstract 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.