Document Type

Working Paper

Publication Date

8-12-2012

Working Paper Number

WP #11012, June 2011 revised August 2012

Abstract

A framework is developed to examine organic crop insurance established by the Risk Management Agency (RMA). Given that RMA links organic and conventional crop prices, the model is calibrated to reflect both markets to illustrate the impacts that pricing has on insurance coverage. Findings indicate that at the 75% coverage level, RMA’s fixed price factor implies an effective coverage ranging from 45% to 106% depending on the ratio of planting-time organic to conventional market prices. Results suggest RMA’s program is likely to induce adverse selection, because the nominal coverage level is likely to substantially deviate from the effective coverage.

JEL Classification

Q12, Q14, Q18

File Format

application/pdf

Length

37 pages

File Function

This version: August, 2012 (First version: June 2011)

Included in

Economics Commons

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