Title

Input Demand under Yield and Revenue Insurance

Campus Units

Economics

Document Type

Article

Publication Version

Submitted Manuscript

Publication Date

1996

Journal or Book Title

American Journal of Agricultural Economics

Volume

78

First Page or Article ID Number

416

Last Page

427

DOI

10.2307/1243713

Abstract

Previous studies disagree on the effects of insurance on fertilizer application rates. The effect of increased fertilizer on the probability of low yields primarily determines whether fertilizer and insurance are substitutes or complements. We estimate conditional distributions of corn yields to determine if the technical relationship between yields and fertilizer supports the hypothesis that insurance increases optimal application rates. Our results indicate no support for this hypothesis. At all nitrogen fertilizer rates and reasonable levels of risk aversion, nitrogen fertilizer and insurance are substitutes, suggesting that those who purchase insurance are likely to decrease nitrogen fertilizer applications.

Comments

This working paper was published as Babcock, Bruce A. and David A. Hennessy, "Input Demand under Yield and Revenue Insurance," American Journal of Agricultural Economics 78 (1996): 416–427, doi:10.2307/1243713.