Research Reports on Crop Insurance from Massey University Provide New Insights (Subsidized Crop Insurance under Limited Access to Incomplete Financial Markets): Agriculture – Crop Insurance

2023 JAN 04 (NewsRx) -- By a News Reporter-Staff News Editor at Insurance Daily News -- Investigators publish new report on crop insurance. According to news reporting originating from Palmerston, New Zealand, by NewsRx correspondents, research stated, “Almost universally, crop insurance uptake has been very low in the absence of significant governmental subsidies.”

Our news journalists obtained a quote from the research from Massey University: “We proposed an explanation for the low uptake by analyzing farmers’ optimal behavior in the presence of subsidized crop insurance and incomplete financial markets. Under specific replication conditions, farmers’ valuation of crop insurance is lower than insurers’ valuation if farmers have access to fewer financial assets than insurers. A potential rationalization is that farmers and insurers have dissimilar price formation processes.”

According to the news reporters, the research concluded: “Our model implies that subsidized crop insurance changes farmers’ production choices by altering both the relative returns across states of Nature and their risk choices. However, because of the separation between consumption and production decisions, farmers will use crop insurance in a manner consistent with profit maximization, independent of risk preferences.”

For more information on this research see: Subsidized Crop Insurance under Limited Access to Incomplete Financial Markets. The B.E. Journal of Economic Analysis & Policy, 2022,0(0). The publisher for The B.E. Journal of Economic Analysis & Policy is Walter de Gruyter GmbH.

A free version of this journal article is available at https://doi.org/10.1515/bejeap-2021-0073.

Our news editors report that additional information may be obtained by contacting Daniel C. Voica, School of Economics and Finance, Massey University, SST4.07, University Avenue, Palmerston North, 4442, New Zealand.

(Our reports deliver fact-based news of research and discoveries from around the world.)