Crop insurance valuation under alternative yield distributions

Bruce J. Sherrick; Fabio C. Zanini; Gary D. Schnitkey; Scott H. Irwin

doi:10.1111/j.0092-5853.2004.00587.x

Crop insurance valuation under alternative yield distributions

Bruce J. Sherrick, Fabio C. Zanini, Gary D. Schnitkey, Scott H. Irwin

Research output: Contribution to journal › Article › peer-review

Abstract

Considerable disagreement exists about the most appropriate characterization of farm-level yield distributions. Yet, the economic importance of alternative yield distribution specifications on crop insurance valuation has not been well documented. The results of this study demonstrate that large differences in expected payouts from popular crop insurance products can arise solely from the parameterization chosen to represent yield distributions. The results suggest that the frequently unexamined yield distribution specification may lead to economically significant errors in crop insurance policy rating and assessment of expected payouts from policies.

Original language	English (US)
Pages (from-to)	406-419
Number of pages	14
Journal	American Journal of Agricultural Economics
Volume	86
Issue number	2
DOIs	https://doi.org/10.1111/j.0092-5853.2004.00587.x
State	Published - May 2004

Keywords

Crop insurance
Crop-yield distributions
Risk and uncertainty
Valuation

ASJC Scopus subject areas

Agricultural and Biological Sciences (miscellaneous)
Economics and Econometrics

Online availability

10.1111/j.0092-5853.2004.00587.x

Library availability

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Cite this

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title = "Crop insurance valuation under alternative yield distributions",

abstract = "Considerable disagreement exists about the most appropriate characterization of farm-level yield distributions. Yet, the economic importance of alternative yield distribution specifications on crop insurance valuation has not been well documented. The results of this study demonstrate that large differences in expected payouts from popular crop insurance products can arise solely from the parameterization chosen to represent yield distributions. The results suggest that the frequently unexamined yield distribution specification may lead to economically significant errors in crop insurance policy rating and assessment of expected payouts from policies.",

keywords = "Crop insurance, Crop-yield distributions, Risk and uncertainty, Valuation",

author = "Sherrick, {Bruce J.} and Zanini, {Fabio C.} and Schnitkey, {Gary D.} and Irwin, {Scott H.}",

note = "Funding Information: The authors thank Jonathan Norvell of the University of Illinois Endowment Farms for providing the yield data. Partial funding support was provided by the Illinois Council on Food and Agricultural Research (C-FAR). Helpful comments from Robert J. Myers, editor, and anonymous reviewer suggestions are gratefully acknowledged. All remaining errors are those of the authors.",

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AU - Irwin, Scott H.

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PY - 2004/5

Y1 - 2004/5

N2 - Considerable disagreement exists about the most appropriate characterization of farm-level yield distributions. Yet, the economic importance of alternative yield distribution specifications on crop insurance valuation has not been well documented. The results of this study demonstrate that large differences in expected payouts from popular crop insurance products can arise solely from the parameterization chosen to represent yield distributions. The results suggest that the frequently unexamined yield distribution specification may lead to economically significant errors in crop insurance policy rating and assessment of expected payouts from policies.

AB - Considerable disagreement exists about the most appropriate characterization of farm-level yield distributions. Yet, the economic importance of alternative yield distribution specifications on crop insurance valuation has not been well documented. The results of this study demonstrate that large differences in expected payouts from popular crop insurance products can arise solely from the parameterization chosen to represent yield distributions. The results suggest that the frequently unexamined yield distribution specification may lead to economically significant errors in crop insurance policy rating and assessment of expected payouts from policies.

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KW - Risk and uncertainty

KW - Valuation

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Crop insurance valuation under alternative yield distributions

Abstract

Keywords

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