IDEAS home Printed from https://ideas.repec.org/a/eme/afrpps/v69y2009i3p330-345.html
   My bibliography  Save this article

The impact of the average crop revenue election (ACRE) program on the effectiveness of crop insurance

Author

Listed:
  • Gabriel J. Power
  • Dmitry V. Vedenov
  • Sung‐wook Hong

Abstract

Purpose - The purpose of this paper is to analyze the effect of the 2008 Farm Bill's average crop revenue election (ACRE) program on the risk‐reducing effectiveness of crop insurance products. Design/methodology/approach - Three crop/region combinations are examined, representing regions with both high and low price‐yield correlation regions. Actual production history (APH) and crop revenue coverage (CRC) insurance instruments are considered separately under the 2002 Farm Bill and under ACRE. Monte Carlo simulations, combined with the copula approach, are used to simulate net wealth distributions and to calculate the corresponding expected utilities. The outcomes are evaluated using certainty‐equivalent wealth based on different risk premium assumptions. Findings - Crop insurance contracts appear to be more effective under the 2002 Farm Bill than under ACRE, especially for crops characterized by low yield‐price correlation. CRC insurance is found to be more effective than APH insurance for all crop/region combinations considered. Research limitations/implications - The paper only considers a static framework and farm‐level insurance contracts. Further research could investigate how ACRE affects decoupled income support, whether the results change if Supplemental Revenue Assistance is included, or how different the outcomes might be for multiple‐crop farms. Practical implications - The results suggest that risk‐reducing effectiveness decreases under ACRE and that no reasonable adjustment to APH base price can make APH competitive with CRC for any crop/regions considered. Originality/value - The risk‐reducing effectiveness of the 2008 Farm Bill's ACRE program is analyzed, and as a methodological contribution the copula approach is used to model the multivariate distribution of yields and prices.

Suggested Citation

  • Gabriel J. Power & Dmitry V. Vedenov & Sung‐wook Hong, 2009. "The impact of the average crop revenue election (ACRE) program on the effectiveness of crop insurance," Agricultural Finance Review, Emerald Group Publishing Limited, vol. 69(3), pages 330-345, November.
    • Handle: RePEc:eme:afrpps:v:69:y:2009:i:3:p:330-345
    DOI: 10.1108/00021460911002707
    as

    Download full text from publisher

    File URL: https://www.emerald.com/insight/content/doi/10.1108/00021460911002707/full/html?utm_source=repec&utm_medium=feed&utm_campaign=repec
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://www.emerald.com/insight/content/doi/10.1108/00021460911002707/full/pdf?utm_source=repec&utm_medium=feed&utm_campaign=repec
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://libkey.io/10.1108/00021460911002707?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Vedenov, Dmitry V. & Power, Gabriel J., 2008. "Risk-Reducing Effectiveness of Revenue versus Yield Insurance in the Presence of Government Payments," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 40(2), pages 1-17, August.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Miao, Ruiqing & Hennessy, David A. & Feng, Hongli, 2016. "The Effects of Crop Insurance Subsidies and Sodsaver on Land-Use Change," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 41(2), May.
    2. Branscum, D. Ethan & Nalley, Lawton L. & Dixon, Bruce L. & Siebenmorgen, Terry J. & Tack, Jesse & Danforth, Diana M., 2014. "Implications of Rice Variety Selection to Optimize Returns from Crop Insurance," 2014 AAEA: Crop Insurance and the 2014 Farm Bill Symposium: Implementing Change in U.S. Agricultural Policy, October 8-9, 2014, Louisville, KY 184247, Agricultural and Applied Economics Association.
    3. Claassen, Roger & Carriazo, Fernando & Cooper, Joseph C. & Hellerstein, Daniel & Ueda, Kohei, 2011. "Grassland to Cropland Conversion in the Northern Plains: The Role of Crop Insurance, Commodity, and Disaster Programs," Economic Research Report 262239, United States Department of Agriculture, Economic Research Service.
    4. Abel Tiemtore, 2021. "Examining the effects of agricultural income insurance on farmers in Burkina Faso," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 46(3), pages 422-439, July.
    5. Shyam Adhikari & Eric J. Belasco & Thomas O. Knight, 2010. "Spatial producer heterogeneity in crop insurance product decisions within major corn producing states," Agricultural Finance Review, Emerald Group Publishing Limited, vol. 70(1), pages 66-78, May.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eme:afrpps:v:69:y:2009:i:3:p:330-345. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Emerald Support (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.