Managing Catastrophic Risk in Agriculture through Ex Ante Subsidized Insurance or Ex Post Disaster Aid

Harun Bulut ()

Journal of Agricultural and Resource Economics, 2017, vol. 42, issue 3

Abstract: We consider a political economy in which government cares about risk-averse farmers’ loss of income but incurs political cost if it provides monetary support to farmers. Farmers’ expectations of government disaster aid and overconfidence (optimism bias) regarding their risk prevent farmers from purchasing full insurance under actuarially fair rates. Considering this conclusion, government prefers to subsidize farmers’ purchases of insurance ex ante rather than solely relying on disaster aid ex post. The resulting subsidy rate depends on the political environment, the degree of systemic risk, the distribution of farmers’ risk preferences, and the nature and distribution of farmers’ risk perceptions.

Keywords: Agricultural and Food Policy; Farm Management; Risk and Uncertainty (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
https://ageconsearch.umn.edu/record/264070/files/J ... 26withSupplement.pdf (application/pdf)
https://ageconsearch.umn.edu/record/264070/files/J ... t.pdf?subformat=pdfa (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ags:jlaare:264070

DOI: 10.22004/ag.econ.264070

Access Statistics for this article

More articles in Journal of Agricultural and Resource Economics from Western Agricultural Economics Association Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search ().