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| LaFrance, Jeffrey T.; Shimshack, Jason; Wu, Steven Y.. |
| A partial equilibrium model of stochastic crop production is used to analyze the influence of subsidized crop insurance on the extensive margin. The addition of a crop insurance program that is characterized by a perfectly separating equilibrium and an actuarially fair premium for each quality does not change input use or land allocation. However, Risk neutral farmers facing actuarially fair premiums are indifferent between the purchase and not purchase decision. risk averse farmers all will purchase actuarially fair crop insurance. Premium subsidies create incentives for the extensive margin to expand at the lower end of the quality spectrum leading to adverse selection. Land in production without crop insurance remains in production with subsidized crop... |
| Tipo: Working or Discussion Paper |
Palavras-chave: Crop Production/Industries; Risk and Uncertainty. |
| Ano: 2000 |
URL: http://purl.umn.edu/25018 |
