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Is there a demand for multi-year crop insurance?

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  • Osipenko, Maria
  • Shen, Zhiwei
  • Odening, Martin

Abstract

In this paper we adapt a dynamic discrete choice model to examine the aggregated demand for single- and multi-year crop insurance contracts. We show that in a competitive insurance market with heterogeneous risk averse farmers, there is simultaneous demand for both insurance contracts. Moreover, the introduction of multi-year contracts enhances the market penetration of insurance products. Using U.S. corn yield data, we empirically assess the potential of multi-year crop insurance.

Suggested Citation

  • Osipenko, Maria & Shen, Zhiwei & Odening, Martin, 2014. "Is there a demand for multi-year crop insurance?," SFB 649 Discussion Papers 2014-025, Humboldt University Berlin, Collaborative Research Center 649: Economic Risk.
    • Handle: RePEc:zbw:sfb649:sfb649dp2014-025
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    References listed on IDEAS

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    1. Chen, Ying-Erh & Goodwin, Barry K., 2010. "The Design of Multiyear Crop Insurance Contracts," 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado 61644, Agricultural and Applied Economics Association.
    2. Paul Kleindorfer & Howard Kunreuther & Chieh Ou-Yang, 2012. "Single-year and multi-year insurance policies in a competitive market," Journal of Risk and Uncertainty, Springer, vol. 45(1), pages 51-78, August.
    3. 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.
    4. Coble, Keith H. & Dismukes, Robert & Thomas, Sarah E., 2007. "Policy Implications of Crop Yield and Revenue Variability at Differing Levels of Disaggregation," 2007 Annual Meeting, July 29-August 1, 2007, Portland, Oregon 9759, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    5. Barry J. Barnett & Dmitry V. Vedenov, 2007. "Is There a Viable Market for Area-Based Crop Insurance?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 89(2), pages 508-519.
    6. Barry K. Goodwin & Vincent H. Smith, 2013. "What Harm Is Done By Subsidizing Crop Insurance?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 95(2), pages 489-497.
    7. Vedenov, Dmitry V. & Barnett, Barry J., 2004. "Efficiency of Weather Derivatives as Primary Crop Insurance Instruments," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 29(3), pages 1-17, December.
    8. R. Norgaard & T. Killeen, 1980. "Expected Utility and the Truncated Normal Distribution," Management Science, INFORMS, vol. 26(9), pages 901-909, September.
    9. Olivier Mahul, 1999. "Optimum area yield crop insurance," Post-Print hal-01952090, HAL.
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    Cited by:

    1. Ying-Erh Chen & Barry K Goodwin, 2015. "Policy Design of Multi-Year Crop Insurance Contracts with Partial Payments," PLOS ONE, Public Library of Science, vol. 10(12), pages 1-15, December.

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    More about this item

    Keywords

    multi-year insurance; index-based crop insurance; dynamic discrete choice model;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • Q14 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Finance

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