Journal Article

Optimum Area Yield Crop Insurance

Olivier Mahul

in American Journal of Agricultural Economics

Published on behalf of Agricultural and Applied Economics Association

Volume 81, issue 1, pages 75-82
Published in print February 1999 | ISSN: 0002-9092
Published online February 1999 | e-ISSN: 1467-8276 | DOI: http://dx.doi.org/10.2307/1244451
Optimum Area Yield Crop Insurance

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This article considers the problem of the optimal design of crop insurance when the indemnity is based upon the aggregate yield of a surrounding area. The optimal area yield crop insurance contract depends on the individual beta coefficient which measures the sensitivity of farm yield to area yield. Indemnity payments are made whenever the realized area yield is lower (higher) than a critical yield if the beta coefficient is positive (negative). The optimal contract contains a “disappearing deductible” if the beta coefficient is higher than unity.

Keywords: crop insurance; efficient risk-sharing; systemic risk; Q140

Journal Article.  0 words. 

Subjects: Agricultural Economics

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