Persistent Link:
http://hdl.handle.net/10150/184536
Title:
IMPACT OF FEDERAL CROP INSURANCE ON OUTPUT MIX AND WELFARE.
Author:
KOUADIO, YAO.
Issue Date:
1982
Publisher:
The University of Arizona.
Rights:
Copyright © is held by the author. Digital access to this material is made possible by the University Libraries, University of Arizona. Further transmission, reproduction or presentation (such as public display or performance) of protected items is prohibited except with permission of the author.
Abstract:
The Federal Crop Insurance program is a management tool which is available to U.S. farmers and which is designed to protect them against low yields arising from natural disasters. Since the program is optional in nature, its provisions cannot be detrimental to a rationally behaving farmer. This work analyzes but goes beyond the private benefits of the Federal Crop Insurance program to farmers and represents a qualitative and quantitative attempt at investigating the implications of the availability of the program on risk-taking behavior and social welfare. Analytically, a simple model of the allocation of land among two crops (one safe and the other risky in the yield) is used along with the behavioral hypothesis of expected utility maximization. It is indicated that a subsidized program will, in general, induce greater risk-taking behavior. The impact of the program on crop-mix is, however, ambiguous when the expected insurance indemnities fall short of the premium paid. Given insurance availability, however, it is demonstrated that, under some reasonable assumptions about farmers' risk preferences, a premium subsidy will tend to induce greater risk taking. A major portion of the empirical work, which is undertaken within an expected value of income-variance of income framework, relates to the estimation of farmers' risk preferences on the basis of actual crop-mix data for individual farms in Arizona and estimated subjective distributions about prices, yields and costs of production. The estimation of the subjective distribution of prices is based on futures as well as cash prices. Given the risk aversion coefficient estimates for a sample of thirteen farmers, predicted crop-mixes are then obtained under the cases of insurance availability and no insurance. Results of the empirical study suggest that the Federal Crop Insurance program (in its pre-1980 version at least) does not have a significant impact on crop-mix. Finally, using the Arrow-Lind criterion of welfare assessment under uncertainty, the study casts doubt on the social desirability of the Federal Crop Insurance program.
Type:
text; Dissertation-Reproduction (electronic)
Keywords:
Crop insurance.; Farm risks.
Degree Name:
Ph.D.
Degree Level:
doctoral
Degree Program:
Economics; Graduate College
Degree Grantor:
University of Arizona

Full metadata record

DC FieldValue Language
dc.language.isoenen_US
dc.titleIMPACT OF FEDERAL CROP INSURANCE ON OUTPUT MIX AND WELFARE.en_US
dc.creatorKOUADIO, YAO.en_US
dc.contributor.authorKOUADIO, YAO.en_US
dc.date.issued1982en_US
dc.publisherThe University of Arizona.en_US
dc.rightsCopyright © is held by the author. Digital access to this material is made possible by the University Libraries, University of Arizona. Further transmission, reproduction or presentation (such as public display or performance) of protected items is prohibited except with permission of the author.en_US
dc.description.abstractThe Federal Crop Insurance program is a management tool which is available to U.S. farmers and which is designed to protect them against low yields arising from natural disasters. Since the program is optional in nature, its provisions cannot be detrimental to a rationally behaving farmer. This work analyzes but goes beyond the private benefits of the Federal Crop Insurance program to farmers and represents a qualitative and quantitative attempt at investigating the implications of the availability of the program on risk-taking behavior and social welfare. Analytically, a simple model of the allocation of land among two crops (one safe and the other risky in the yield) is used along with the behavioral hypothesis of expected utility maximization. It is indicated that a subsidized program will, in general, induce greater risk-taking behavior. The impact of the program on crop-mix is, however, ambiguous when the expected insurance indemnities fall short of the premium paid. Given insurance availability, however, it is demonstrated that, under some reasonable assumptions about farmers' risk preferences, a premium subsidy will tend to induce greater risk taking. A major portion of the empirical work, which is undertaken within an expected value of income-variance of income framework, relates to the estimation of farmers' risk preferences on the basis of actual crop-mix data for individual farms in Arizona and estimated subjective distributions about prices, yields and costs of production. The estimation of the subjective distribution of prices is based on futures as well as cash prices. Given the risk aversion coefficient estimates for a sample of thirteen farmers, predicted crop-mixes are then obtained under the cases of insurance availability and no insurance. Results of the empirical study suggest that the Federal Crop Insurance program (in its pre-1980 version at least) does not have a significant impact on crop-mix. Finally, using the Arrow-Lind criterion of welfare assessment under uncertainty, the study casts doubt on the social desirability of the Federal Crop Insurance program.en_US
dc.typetexten_US
dc.typeDissertation-Reproduction (electronic)en_US
dc.subjectCrop insurance.en_US
dc.subjectFarm risks.en_US
thesis.degree.namePh.D.en_US
thesis.degree.leveldoctoralen_US
thesis.degree.disciplineEconomicsen_US
thesis.degree.disciplineGraduate Collegeen_US
thesis.degree.grantorUniversity of Arizonaen_US
dc.identifier.proquest8227357en_US
dc.identifier.oclc682925047en_US
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