Modeling Farm‐Level Crop Insurance Demand with Panel Data

Abstract

A random-effects, binomial probit model is applied to data for a panel of Kansas wheat farms to examine Multiple Peril Crop Insurance demand. A theoretical model is developed which suggests inclusion of the moments of both market return and the return to insurance. Empirical results indicate that the first and second moments of both market return and the returns to insurance are significant. The price elasticity of demand is estimated to be −0.65. Preseason weather variables when included in the models were not found to be significant, failing to support the hypothesis of intertemporal adverse selection. Copyright 1996, Oxford University Press.

Crop Revenue and Yield Insurance Demand: A Subjective Probability Approach

“…A multinomial discrete choice model of crop insurance participation and whether to opt for yield or revenue insurance is developed building on the participation model developed by Coble et al (1996). To model the unordered choices of participation, yield, and revenue insurance, we assume producers maximize expected utility according to a von Neuman-Morgenstern utility function defined over wealth (W).…”

“…While on average, the program was paying out more than a dollar for every dollar producers paid in premiums, the participation rate was relatively low. Research by Coble et al (1996) and Goodwin and Smith suggested that the program was likely affected by adverse selection, such that program participants were earning significant positive returns while nonparticipants perceived that they would not receive a benefit, either in terms of expected return or risk reduction, sufficient to justify the premium.…”

“…While there is a significant body of literature on crop insurance demand (e.g., Coble et al [1996]; Smith and Baquet; Barnett and Skees; Schnitkey, Sherrick, and Irwin; Shaik and Atwood; and Serra, Goodwin and Featherstone), that literature largely concentrates on demand for yield insurance. Relatively little research has been conducted that specifically investigates the demand for crop insurance in the context of a revenue insurance program.…”

Agricultural insurance policies in Spain and the EU: an analysis of existent and new risk management tools focusing on indirect risk assessment, and asymmetric information

“…Babcock andHart, 2005 andDonoghue, 2014), risk frequency (e.g. Coble et al, 1996), asymmetric information (e.g. Zilberman, 2008 andGlauber et al, 2002) or farmers characteristics (Santeramo et al, 2016a).…”

Risks in the farms in Poland and their financing – research findings

“…More detailed analyses of demand for crop insurance, i.e. the factors which really affect the purchase of insurance and future demand forecasts are usually focused on other markets, mainly in the US [Coble et al 1996;Goodwin, Vandeveer, Deal 2004;Mishra, Goodwin 2003;Sherrick et al 2004;Garrido, Zilberman 2008;Ogurtsov, Van Asseldonk, Huirne 2009].…”