Producer heterogeneity, insurance decisions and economic impacts of crop insurance

Charalampos Mavroutsikos, Konstantinos Giannakas and Cory Walters

Journal of Policy Modeling, 2026, vol. 48, issue 1, 241-254

Abstract: This paper introduces the empirically relevant heterogeneity/differences in producer attitudes towards risk into the analysis of the economic impacts of crop insurance. Analytical results show that individual producer risk attitudes matter. Specifically, our study shows that the producer insurance decisions, the market shares of the different insurance options, and the welfare impacts of crop insurance are very much dependent on the producer aversion to risk as well as the risk exposure faced by producers, the reduction in this risk exposure offered by crop insurance, and the crop insurance premiums. Understanding the producer response to different crop insurance options is important for the formulation of policies that align with diverse risk profiles. Our analysis indicates that maintaining the status quo will further exacerbate regional differences in the economic impacts of crop insurance. Our analysis suggests that crop insurance policy design should consider a customized approach through a variable premium subsidy scheme to effectively address regional disparities in risk exposure and insurance coverage.

Keywords: Crop insurance; Coverage level; Risk attitudes; Producer heterogeneity; Fractional model; Economic impacts; Regional differences (search for similar items in EconPapers)
JEL-codes: Q18 (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jpolmo:v:48:y:2026:i:1:p:241-254

DOI: 10.1016/j.jpolmod.2025.10.001

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