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Economic Evaluation of Bt Corn Refuge Insurance

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  • Paul D. Mitchell
  • Terrance M. Hurley
  • Richard L. Hellmich

Abstract

In order to prolong the efficacy of Bt, the Environmental Protection Agency has imposed mandatory refuge requirements for Bt crops. Growers, however, have no economic incentive to comply with requirements because, on average, refuge crops are riskier and less productive. The authors evaluate refuge insurance, meaning insurance that pays indemnities for yield losses on refuge due to insect damage, as a tool to increase grower compliance incentives. The authors evaluate the feasibility of private provision of refuge insurance and its impact on grower incentives to comply with refuge requirements. They conclude that, to provide significant compliance incentives, conventional insurance products must be restructured to draw premiums from sources other than grower risk premiums.

Suggested Citation

  • Paul D. Mitchell & Terrance M. Hurley & Richard L. Hellmich, 2000. "Economic Evaluation of Bt Corn Refuge Insurance," Center for Agricultural and Rural Development (CARD) Publications 00-wp243, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    • Handle: RePEc:ias:cpaper:00-wp243
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    References listed on IDEAS

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    1. Terrance M. Hurley & Bruce A. Babcock & Richard L. Hellmich, 1997. "Biotechnology and Pest Resistance: An Economic Assessment of Refuges," Center for Agricultural and Rural Development (CARD) Publications 97-wp183, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    2. Erik Lichtenberg & David Zilberman, 1986. "The Econometrics of Damage Control: Why Specification Matters," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 68(2), pages 261-273.
    3. Mitchell, Paul David, 1999. "The theory and practice of green insurance: insurance to encourage the adoption of corn rootworm IPM," ISU General Staff Papers 1999010108000013154, Iowa State University, Department of Economics.
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    Cited by:

    1. Terrance Hurley & Silvia Secchi & Bruce Babcock & Richard Hellmich, 2002. "Managing the Risk of European Corn Borer Resistance to Bt Corn," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 22(4), pages 537-558, August.
    2. Wang, Willa & Van der Sluis, Evert, 2005. "Corn Producer Practices and Insect Resistance Management Requirements," 2005 Annual meeting, July 24-27, Providence, RI 19472, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).

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