Spatial Pattern of Yield Distributions: Implications for Crop Insurance

16 Pages Posted: 15 Apr 2020

See all articles by Francis Annan

Francis Annan

Georgia State University

Jesse Tack

Kansas State University

Ardian Harri

Mississippi State University - Department of Agricultural Economics

Keith Coble

Mississippi State University

Date Written: January 2014

Abstract

Crop insurance is similar to flood and hurricane insurance in that spatially correlated weather tends to cause violations of the independence assumption. Ideally, one would seek to pool uncorrelated risk drawn from the same distribution in crop insurance. This article proposes a testing procedure for the cross‐sectional pooling of group units, and empirically analyzes whether the proposed test improves out‐of‐sample rating performance. We utilize a balanced panel of U.S. county‐level corn yields for 510 counties, and the results of an out‐of‐sample crop insurance rating performance exercise provide economic significance to the proposed pooling methodology and results.

Keywords: Corn, crop insurance, effective sample size, spatial correlation, yield

Suggested Citation

Annan, Francis and Tack, Jesse and Harri, Ardian and Coble, Keith, Spatial Pattern of Yield Distributions: Implications for Crop Insurance (January 2014). American Journal of Agricultural Economics, Vol. 96, Issue 1, pp. 253-268, 2014, Available at SSRN: https://ssrn.com/abstract=3573704 or http://dx.doi.org/10.1093/ajae/aat085

Francis Annan (Contact Author)

Georgia State University ( email )

35 Broad St NW
Atlanta, GA 30309
United States

Jesse Tack

Kansas State University ( email )

Manhatten, KS 66506-4001
United States

Ardian Harri

Mississippi State University - Department of Agricultural Economics ( email )

Box 5187
Mississippi State, MS 39762
United States

Keith Coble

Mississippi State University

Mississippi State, MS 39762
United States

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