Hostname: page-component-cd9895bd7-mkpzs Total loading time: 0 Render date: 2024-12-23T16:16:27.706Z Has data issue: false hasContentIssue false
  • English
  • Français

Modeling Exit and Entry of Farmers in a Crop Insurance Program

Published online by Cambridge University Press:  15 September 2016

Juan H. Cabas ,
Akssell J. Leiva  and
Alfons Weersink
Juan H. Cabas
Affiliation:
Facultad de Estudios Empresariales at the Universidad del Βío Βío in Chile
Akssell J. Leiva
Affiliation:
Program Development Division at Agricorp
Alfons Weersink
Affiliation:
Agricultural and Resource Economics (FARE) Department at the University of Guelph
Get access Rights & Permissions [Opens in a new window]

Abstract

This paper examines the factors influencing farmer participation in crop insurance schemes, but unlike previous studies that focus on total demand, participation is disaggregated into entrants and those exiting. Modeling entry and exit decisions separately illustrates that the effect of a given variable is often muted by aggregation. In addition, the approach in this paper distinguishes between price and yield variables rather than total returns and is consequently able to demonstrate that price variables are particularly important for farmers considering enrolling in crop insurance, while yield variables and other risk management opportunities are more important for farmers who have been in the program but are deciding to exit. The result suggests that moral hazard is reduced significantly by calculating the coverage yield level for an individual producer on the basis of a moving average of past yields for that farmer. While yield and its variance are particularly influential in the participation decision for farmers currently enrolled, its significant impact on the insurance decision for all farmers highlights the importance of crop insurance as a potential adaptation strategy to weather events.

Keywords

crop insuranceentryexitpanel data
Type
Contributed Papers
Information
Agricultural and Resource Economics Review , Volume 37 , Issue 1 , April 2008 , pp. 92 - 105
Copyright
Copyright © 2008 Northeastern Agricultural and Resource Economics Association 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Adesina, A., and Brorsen, B.W. 1987. “A Risk Responsive Acreage Response Function for Millet in Niger.” Agricultural Economics 1(3): 229–239.CrossRefGoogle Scholar
Barnett, B.J., Skees, J.R., and Hourigan, J.D. 1990. “Examining Participation in Federal Crop Insurance.” Staff Paper No. 275, Department of Agricultural Economics, University of Kentucky, Lexington, KY.Google Scholar
Cannon, D.L., and Barnett, B.J. 1995. “Modeling Changes in the Federal Multiple Peril Crop Insurance Program between 1982 and 1987.” Selected paper presented at the American Agricultural Economics Association Meetings, Indianapolis, IN.Google Scholar
Coble, K.H., Knight, T.O., Pope, R.D., and Williams, J.R. 1996. “Modeling Farm-Level Crop Insurance Demand with Panel Data.” American Journal of Agricultural Economics 78(2): 439–447.Google Scholar
Gardner, B.L., and Kramer, R.A. 1986. “Experience with Crop Insurance Programs in the United States.” In Hazell, P.B.R., Pomareda, C., and Valdes, A., eds., Crop Insurance for Agricultural Development: Issues and Experience. Baltimore, MD: Johns Hopkins University Press.Google Scholar
Garrido, A., Bielza, M., and Sumpsi, J.M. 2002. “The Impact of Crop Insurance Subsidies on Land Allocation and Production in Spain.” Report No. AGR/CA/APM 16, Organization for Economic Cooperation and Development.Google Scholar
Goodwin, B.K. 1993. “An Empirical Analysis of the Demand for Multiple Peril Crop Insurance.” American Journal of Agricultural. Economics 75(2): 425–434.Google Scholar
Goodwin, B.K., and Smith, V.H. 1995. The Economics of Crop Insurance and Disaster Aid. Washington, D.C.: The AEI Press.Google Scholar
Hojjatti, B., and Bockstael, N.E. 1988. “Modeling the Demand for Crop Insurance.” In Mapp, H., ed., Multiple Peril Crop Insurance: A Collection of Empirical Studies. Southern Cooperative Series Bulletin No. 334.Google Scholar
Jose, H.D., and Valluru, R.S.K. 1997. “Insights from the Crop Insurance Reform Act of 1994.” Agribusiness 13(6): 587–598.3.0.CO;2-#>CrossRefGoogle Scholar
Mishra, A.K., and El-Osta, H.S. 2002. “Managing Risk in Agriculture Through Hedging and Crop Insurance: What Does a National Survey Reveal?” Agricultural Finance Review 62(2): 135–148.Google Scholar
Nieuwoudt, W.L., Johnson, S.R., Womack, A.W., and Bullock, J.B. 1985. “The Demand for Crop Insurance.” Agricultural Economics Report No. 1985-16, Department of Agricultural Economics, University of Missouri-Columbia.Google Scholar
Sarno, L., and Taylor, M. 1998. “Real Exchange Rates under the Current Float: Unequivocal Evidence of Mean Reversion.” Economics Letters 60(2): 131–137.Google Scholar
Sherrick, B.J. 2003. “Farmers’ Preferences for Crop Insurance Attributes.” Review of Agricultural Economics 25(2): 415–429.Google Scholar
Sherrick, B.J., Barry, P.J., Ellinger, P.N., and Schnitkey, G.D. 2004. “Factors Influencing Farmers’ Crop Insurance Decisions.” American Journal of Agricultural Economics 86(1): 103–114.CrossRefGoogle Scholar