Simultaneous Analysis of Insurance Participation and Acreage Response from Subsidized Crop Insurance for Cotton

US crop insurance is subsidized to encourage producers to participate and reduce their risk exposure. However, what has been the impact of these subsidies on insurance demand and crop acres planted? Using a simultaneous system of two equations, we quantify both insurance participation and acreage re...

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Autores principales:	Ibrahima Sall, Russell Tronstad
Formato:	article
Lenguaje:	EN
Publicado:	MDPI AG 2021
Materias:	Bt adoption insurance participation acreage response fixed effects subsidy per pound rate of return Risk in industry. Risk management HD61 Finance HG1-9999
Acceso en línea:	https://doaj.org/article/414fc1ef1106465cad0588815937d56f
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spelling	oai:doaj.org-article:414fc1ef1106465cad0588815937d56f2021-11-25T18:08:49ZSimultaneous Analysis of Insurance Participation and Acreage Response from Subsidized Crop Insurance for Cotton10.3390/jrfm141105621911-80741911-8066https://doaj.org/article/414fc1ef1106465cad0588815937d56f2021-11-01T00:00:00Zhttps://www.mdpi.com/1911-8074/14/11/562https://doaj.org/toc/1911-8066https://doaj.org/toc/1911-8074US crop insurance is subsidized to encourage producers to participate and reduce their risk exposure. However, what has been the impact of these subsidies on insurance demand and crop acres planted? Using a simultaneous system of two equations, we quantify both insurance participation and acreage response to subsidized crop insurance for cotton-producing counties across the US at the national and regional levels. We also quantify the impact of both the realized rate of return and the expected subsidy per pound, plus the combined effects of expected yield and price while accounting for the adoption of <i>Bacillus thuringiensis</i> (Bt) technology and other factors. Results show that both the rate of return and the expected subsidy per unit of production have a statistically significant and positive effect on the percentage of arable acres planted. Furthermore, the marginal effect of expected price on insurance participation is much more significant for low- than high-yield counties. Results indicate that not all regions respond the same to subsidized crop insurance and that subsidies should be based on dollars per expected unit of production rather than expected production to be less distorting. Overall, US cotton acreage response is estimated to be inelastic (0.58) to insurance participation.Ibrahima SallRussell TronstadMDPI AGarticleBt adoptioninsurance participationacreage responsefixed effectssubsidy per poundrate of returnRisk in industry. Risk managementHD61FinanceHG1-9999ENJournal of Risk and Financial Management, Vol 14, Iss 562, p 562 (2021)
institution	DOAJ
collection	DOAJ
language	EN
topic	Bt adoption insurance participation acreage response fixed effects subsidy per pound rate of return Risk in industry. Risk management HD61 Finance HG1-9999
spellingShingle	Bt adoption insurance participation acreage response fixed effects subsidy per pound rate of return Risk in industry. Risk management HD61 Finance HG1-9999 Ibrahima Sall Russell Tronstad Simultaneous Analysis of Insurance Participation and Acreage Response from Subsidized Crop Insurance for Cotton
description	US crop insurance is subsidized to encourage producers to participate and reduce their risk exposure. However, what has been the impact of these subsidies on insurance demand and crop acres planted? Using a simultaneous system of two equations, we quantify both insurance participation and acreage response to subsidized crop insurance for cotton-producing counties across the US at the national and regional levels. We also quantify the impact of both the realized rate of return and the expected subsidy per pound, plus the combined effects of expected yield and price while accounting for the adoption of <i>Bacillus thuringiensis</i> (Bt) technology and other factors. Results show that both the rate of return and the expected subsidy per unit of production have a statistically significant and positive effect on the percentage of arable acres planted. Furthermore, the marginal effect of expected price on insurance participation is much more significant for low- than high-yield counties. Results indicate that not all regions respond the same to subsidized crop insurance and that subsidies should be based on dollars per expected unit of production rather than expected production to be less distorting. Overall, US cotton acreage response is estimated to be inelastic (0.58) to insurance participation.
format	article
author	Ibrahima Sall Russell Tronstad
author_facet	Ibrahima Sall Russell Tronstad
author_sort	Ibrahima Sall
title	Simultaneous Analysis of Insurance Participation and Acreage Response from Subsidized Crop Insurance for Cotton
title_short	Simultaneous Analysis of Insurance Participation and Acreage Response from Subsidized Crop Insurance for Cotton
title_full	Simultaneous Analysis of Insurance Participation and Acreage Response from Subsidized Crop Insurance for Cotton
title_fullStr	Simultaneous Analysis of Insurance Participation and Acreage Response from Subsidized Crop Insurance for Cotton
title_full_unstemmed	Simultaneous Analysis of Insurance Participation and Acreage Response from Subsidized Crop Insurance for Cotton
title_sort	simultaneous analysis of insurance participation and acreage response from subsidized crop insurance for cotton
publisher	MDPI AG
publishDate	2021
url	https://doaj.org/article/414fc1ef1106465cad0588815937d56f
work_keys_str_mv	AT ibrahimasall simultaneousanalysisofinsuranceparticipationandacreageresponsefromsubsidizedcropinsuranceforcotton AT russelltronstad simultaneousanalysisofinsuranceparticipationandacreageresponsefromsubsidizedcropinsuranceforcotton
_version_	1718411554565652480

Simultaneous Analysis of Insurance Participation and Acreage Response from Subsidized Crop Insurance for Cotton

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