Yield Guarantees and the Producer Welfare Benefits of Crop Insurance

Autor: Shyam Adhikari, Thomas O. Knight, Eric J. Belasco
Jazyk: angličtina
Rok vydání: 2013
Předmět:
Zdroj: Journal of Agricultural and Resource Economics, Vol 38, Iss 1, Pp 78-92 (2013)
Druh dokumentu: article
ISSN: 1068-5502
2327-8285
DOI: 10.22004/ag.econ.148247
Popis: Farm-level crop insurance guarantees are based on a small sample of historical yields. Two measures enacted by Congress, yield substitution and yield floors, are intended to mitigate the erratic nature of small samples in determining yield guarantees. We examine the impact of small samples and related policy provisions on the producer welfare benefits of individual-level yield insurance. Our findings indicate that sampling variability in Actual Production History (APH) yields has the potential to reduce producer welfare and that the magnitude of this effect differs substantially across crops. The yield substitution and yield floor provisions mitigate the negative impact of sampling error but also bias guarantees upward, increasing government cost of the insurance programs.
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