Performance of farm level vs area level crop insurance
Awondo, Sebastain NDE
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This study investigated the performance of Actual Production History (APH), a farm level crop insurance plan, vis-´a-vis Group Risk Plan (GRP), an area level crop insurance, as a farm risk management tool. We estimated actuarially fair premiums and trigger probabilities under both plans using a two-step hierarchical Bayes small area estimator. Certainty equivalent revenues based on a risk averse utility function were derived under three insurance choice scenario (APH, GRP, no insurance) with and without actual Federal subsidies. Finally, we derived the performance of each alternative plan with regards to the other following a pair-wise comparison of certainty equivalent revenues.