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Toward a Theory of Agricultural Insurance

Author

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  • Syed M. Ahsan
  • Ali A. G. Ali
  • N. John Kurian

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.

Suggested Citation

  • Syed M. Ahsan & Ali A. G. Ali & N. John Kurian, 1982. "Toward a Theory of Agricultural Insurance," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 64(3), pages 510-529.
    • Handle: RePEc:oup:ajagec:v:64:y:1982:i:3:p:510-529.
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    File URL: http://hdl.handle.net/10.2307/1240644
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    Citations

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    Cited by:

    1. Seo, Sangtaek & Leatham, David J. & Mitchell, Paul D., 2003. "Risk Sharing and Incentives with Crop Insurance and External Equity Financing," 2003 Regional Committee NCT-194, October 6-7, 2003; Kansas City, Missouri 132523, Regional Research Committee NC-1014: Agricultural and Rural Finance Markets in Transition.
    2. Olivier Mahul, 1997. "The design of an optimal area yield crop insurance contract," Post-Print hal-01952129, HAL.
    3. Skees, Jerry R., 2000. "A role for capital markets in natural disasters: a piece of the food security puzzle," Food Policy, Elsevier, vol. 25(3), pages 365-378, June.
    4. Shahi Kiran, A.S. & Umesh, Kotrakerebasegowda, 2012. "Crop Insurance- Strategy to minimize risk in Agriculture," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 126734, International Association of Agricultural Economists.
    5. Andreas Hatzigeorgiou & Patrik Karpaty & Richard Kneller & Magnus Lodefalk, 2024. "Immigrant employment and the contract enforcement costs of offshoring," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 160(3), pages 953-981, August.
    6. Fabian, Capitanio & Felice, Adinolfi & Fabio G., Santeramo, 2014. "Crop insurance subsidies and environmental externalities: evidence from Southern Italy," MPRA Paper 62505, University Library of Munich, Germany.
    7. Wang, H. Holly & Rosenman, Robert, 2007. "Perceived need and actual demand for health insurance among rural Chinese residents," China Economic Review, Elsevier, vol. 18(4), pages 373-388.
    8. Mumey, G.A. & Bauer, L. & Boyda, A., 1988. "An Estimate of Risk and Returns From Cropping Alternatives," Project Report Series 232065, University of Alberta, Department of Resource Economics and Environmental Sociology.
    9. Hans Peter Schmidt & Bishnu Hari Pandit & Vegard Martinsen & Gerard Cornelissen & Pellegrino Conte & Claudia I. Kammann, 2015. "Fourfold Increase in Pumpkin Yield in Response to Low-Dosage Root Zone Application of Urine-Enhanced Biochar to a Fertile Tropical Soil," Agriculture, MDPI, vol. 5(3), pages 1-19, September.

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