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An Analysis Of Willingness-To-Pay For Crop Insurance

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  • Fraser, Rob W.

Abstract

In this paper a method for estimating a producer's willingness-to-pay for crop insurance is presented. The method includes formulae to capture the impact of crop insurance on the producer's expected income and variance of income. These impacts are evaluated in the context of a model of producer welfare which features both price and yield uncertainty, as well as risk aversion on the part of the producer. The method is applied to the Australian wheat industry and estimates of willingness-to-pay are shown to be relatively sensitive to the levels of coverage and yield variability.

Suggested Citation

  • Fraser, Rob W., 1992. "An Analysis Of Willingness-To-Pay For Crop Insurance," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 36(01), pages 1-13, April.
    • Handle: RePEc:ags:ajaeau:22476
    DOI: 10.22004/ag.econ.22476
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    References listed on IDEAS

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    4. Fraser, Rob W., 1988. "A Method For Evaluating Supply Response To Price Underwriting," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 32(1), pages 1-15, April.
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    8. Bond, Gary E. & Wonder, Bernard, 1980. "Risk Attitudes Amongst Australian Farmers," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 24(1), pages 1-19, April.
    9. Rob W. Fraser, 1988. "A Method For Evaluating Supply Response To Price Underwriting," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 32(1), pages 22-36, April.
    10. Gary E. Bond & Bernard Wonder, 1980. "Risk Attitudes Amongst Australian Farmers," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 24(1), pages 16-34, April.
    11. Mario J. Miranda, 1991. "Area-Yield Crop Insurance Reconsidered," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 73(2), pages 233-242.
    12. Anderson, Jock R. & Dillon, John L. & Hazell, Peter B.R. & Cowie, A.J. & Wan, G.H., 1988. "Changing Variability in Cereal Production in Australia," Review of Marketing and Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 56(03), pages 1-17, December.
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    Cited by:

    1. Michael R. CARTER & Alain de JANVRY & Elisabeth SADOULET & Alexandros SARRIS, 2014. "Index-based weather insurance for developing countries: A review of evidence and a set of propositions for up-scaling," Working Papers P111, FERDI.
    2. Sonia Akter & Roy Brouwer & Saria Choudhury & Salina Aziz, 2009. "Is there a commercially viable market for crop insurance in rural Bangladesh?," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 14(3), pages 215-229, March.
    3. Brennan, Donna C., 2002. "Savings and technology choice for risk averse farmers," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 46(4), pages 1-13.
    4. Sarris, Alexander, 2002. "The demand for commodity insurance by developing country agricultural producers - theory and an application to cocoa in Ghana," Policy Research Working Paper Series 2887, The World Bank.
    5. Jonas R. Jahnert & Hato Schmeiser & Florian Schreiber, 2022. "Pricing strategies in the German term life insurance market: An empirical analysis," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 25(1), pages 19-34, April.
    6. Apurba Shee & Calum G. Turvey & Ana Marr, 2021. "Heterogeneous Demand and Supply for an Insurance‐linked Credit Product in Kenya: A Stated Choice Experiment Approach," Journal of Agricultural Economics, Wiley Blackwell, vol. 72(1), pages 244-267, February.
    7. Smith, Vincent H. & Chouinard, Hayley H. & Baquet, Alan E., 1994. "Almost Ideal Area Yield Crop Insurance Contracts," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 23(1), pages 1-9, April.
    8. repec:ags:ijag24:346847 is not listed on IDEAS
    9. Pluske, Johanna M. & Fraser, Rob W., 1995. "Can Producers Place Valid and Reliable Valuations on Wool Price-Risk Information?," Review of Marketing and Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 63(02), pages 1-8, August.
    10. Braun, Alexander & Schmeiser, Hato & Schreiber, Florian, 2016. "On consumer preferences and the willingness to pay for term life insurance," European Journal of Operational Research, Elsevier, vol. 253(3), pages 761-776.
    11. Mekonnen, Tigist, 2017. "Willingness to pay for agricultural risk insurance as a strategy to adapt climate change," MERIT Working Papers 2017-028, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    12. Heidelbach, Olaf, 2007. "Efficiency of selected risk management instruments: An empirical analysis of risk reduction in Kazakhstani crop production," Studies on the Agricultural and Food Sector in Transition Economies, Leibniz Institute of Agricultural Development in Transition Economies (IAMO), volume 40, number 92323, September.
    13. Ashimwe, Olive, 2016. "An Economic Analysis Of Impact Of Weather Index-Based Crop Insurance On Household Income In Huye District Of Rwanda," Research Theses 265675, Collaborative Masters Program in Agricultural and Applied Economics.
    14. Dadang Jainal Mutaqin & Koichi Usami, 2019. "Smallholder Farmers’ Willingness to Pay for Agricultural Production Cost Insurance in Rural West Java, Indonesia: A Contingent Valuation Method (CVM) Approach," Risks, MDPI, vol. 7(2), pages 1-18, June.
    15. Liu, Xianglin & Tang, Yingmei & Miranda, Mario J., 2015. "Does Past Experience in Natural Disasters Affect Willingness-to-Pay for Weather Index Insurance? Evidence from China," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 205374, Agricultural and Applied Economics Association.
    16. Maré, Frikkie & Grové, Bennie & Willemse, Johan, 2016. "Estimating The Maximum Value of Crop Hail Insurance Under Stochastic Yield and Price Risk," Agrekon, Agricultural Economics Association of South Africa (AEASA), vol. 54(4), March.
    17. Smith, Vincent H. & Glauber, Joseph & Dismukes, Robert, 2016. "Rent Dispersion in the US Agricultural Insurance Industry:," IFPRI discussion papers 1532, International Food Policy Research Institute (IFPRI).
    18. Sarris, Alexander H., 2003. "The Demand For Commodity Insurance By Developing Country Agricultural Producers: Theory And An Application Of Cocoa In Ghana," 2003 Annual Meeting, August 16-22, 2003, Durban, South Africa 25926, International Association of Agricultural Economists.
    19. Marenya, Paswel Phiri & Smith, Vincent H. & Nkonya, Ephraim M., 2012. "Subsistence farmer preferences for alternative incentive policies to encourage the adoption of conservation agriculture in Malawi: A choice elicitation approach," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124010, Agricultural and Applied Economics Association.
    20. Ashimwe, Olive, 2016. "An Economic Analysis Of Impact Of Weather Index-Based Crop Insurance On Household Income In Huye District Of Rwanda," Research Theses 276460, Collaborative Masters Program in Agricultural and Applied Economics.
    21. H. Holly Wang & Lu Liu & David L. Ortega & Yu Jiang & Qiujie Zheng, 2020. "Are smallholder farmers willing to pay for different types of crop insurance? An application of labelled choice experiments to Chinese corn growers," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 45(1), pages 86-110, January.

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