Input Demand Under Yield and Revenue Insurance

12 Pages Posted: 24 Mar 2020

See all articles by Bruce A. Babcock

Bruce A. Babcock

Iowa State University - Department of Economics

David Hennessy

Iowa State University

Date Written: May 1996

Abstract

Previous studies disagree on the effects of insurance on fertilizer application rates. The effect of increased fertilizer on the probability of low yields primarily determines whether fertilizer and insurance are substitutes or complements. We estimate conditional distributions of corn yields to determine if the technical relationship between yields and fertilizer supports the hypothesis that insurance increases optimal application rates. Our results indicate no support for this hypothesis. At all nitrogen fertilizer rates and reasonable levels of risk aversion, nitrogen fertilizer and insurance are substitutes, suggesting that those who purchase insurance are likely to decrease nitrogen fertilizer applications.

Keywords: crop insurance, fertilizer rates, revenue insurance, yield distributions, G220, Q120, Q150

Suggested Citation

Babcock, Bruce A. and Hennessy, David, Input Demand Under Yield and Revenue Insurance (May 1996). American Journal of Agricultural Economics, Vol. 78, Issue 2, pp. 416-427, 1996, Available at SSRN: https://ssrn.com/abstract=3559741 or http://dx.doi.org/10.2307/1243713

Bruce A. Babcock (Contact Author)

Iowa State University - Department of Economics ( email )

Heady Hall
578 Heady Hall
Ames, IA 50011-2063
United States

David Hennessy

Iowa State University

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
0
Abstract Views
50
PlumX Metrics