Risk-Reducing Effectiveness of Revenue versus Yield Insurance in the Presence of Government Payments

Government farm support programs such as Loan Deficiency Payments (LDP) and Counter-Cyclical Payments (CCP) have payoff structures that effectively make them costless price insurance instruments. A combination of these payments with yield insurance may provide a viable alternative to revenue insurance. This paper finds that, contrary to expectations, the revenue product analyzed is uniformly superior to yield insurance under both current (2002) and proposed (2008) Farm Bill structures of government payments. Given minor adjustments, however, yield insurance combined with government payments can provide more effective risk management than revenue insurance in production areas with low yield–price correlation.


Issue Date:
2008-08
Publication Type:
Journal Article
PURL Identifier:
http://purl.umn.edu/46982
Published in:
Journal of Agricultural and Applied Economics, Volume 40, Number 2
Page range:
443-459
Total Pages:
17
JEL Codes:
Q14; Q18




 Record created 2017-04-01, last modified 2017-04-28

Fulltext:
Download fulltext
PDF

Rate this document:

Rate this document:
1
2
3
 
(Not yet reviewed)