A Two-Stage Model of the Demand for Specialty Crop Insurance

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Abstract

Recent proposals to reform the federal Multiple-Peril Crop Insurance Program for specialty crops raised concerns that a higher cost for catastrophic-level coverage would significantly reduce program participation. This study estimates the demand for three levels of insurance coverage (50%, 65%, 75%) using aggregate data from grape production in 11 California counties from 1986-96. A discrete/continuous econometric model of the choice of coverage level and the amount of insurance finds that the price-elasticity of demand for 50% coverage is elastic, suggesting that premium increases may indeed reduce participation significantly. Such increases may also cause a significant reallocation of growers among coverage levels.

Original languageEnglish (US)
Pages (from-to)177-194
Number of pages18
JournalJournal of Agricultural and Resource Economics
Volume25
Issue number1
StatePublished - Jul 1 2000

Keywords

  • California
  • Crop insurance
  • Discrete/continuous choice
  • Grapes
  • Ordered probit

ASJC Scopus subject areas

  • Animal Science and Zoology
  • Agronomy and Crop Science
  • Economics and Econometrics

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