Production and Moral Hazard Effects of 2014 Cotton Farm Bill Policies

Abstract We develop a model for a representative risk-averse cotton farmer to analyze the impact of crop insurance policies (RP, YP, STAX, and SCO). The model is calibrated and numerically optimized to quantify the effects of different insurance policy combinations on input use, insurance coverage levels, premiums, and certainty equivalent. When the farmer elects only RP, the optimal coverage rate is 80%. Under RP&STAX, the optimal RP coverage rate is 70% and the STAX coverage rate is 90%. RP&STAX is the optimal policy combination based on certainty equivalents. The RP&SCO combination has the lowest impact of input use.

Issue Date:
Jan 18 2018
Publication Type:
Conference Paper/ Presentation
Record Identifier:

 Record created 2018-01-18, last modified 2018-01-22

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