Enhanced Agriculture Insurance with Climate Forecast

Lanlan Li, Zhengqiao Liu, Jing-Yi Chen, Yang-Che Wu () and Hong Li
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Lanlan Li: Accounting Department of Business School, Hunan International Economics University, Changsha 410205, China
Zhengqiao Liu: Department of Applied Economics, School of Economics and Management, Yango University, Fuzhou 350015, China
Jing-Yi Chen: Department of Insurance and Finance, National Taichung University, Taichung 403336, Taiwan
Yang-Che Wu: Department of Finance, College of Finance, Feng Chia University, Taichung 407102, Taiwan
Hong Li: Gordon S. Lang School of Business and Economics, University of Guelph, Guelph, ON N1G 2W1, Canada

Sustainability, 2022, vol. 14, issue 17, 1-16

Abstract: This paper presents a model to study how climate forecasts and the agricultural production function affect the effectiveness of government policies (disaster bailouts and agricultural income tax) and agricultural insurance (both compulsory and voluntary). In the base model with a neoclassical production function, we find that these programs could increase farmers’ expected profit and reduce its volatility. Furthermore, credible climate forecasts enable farmers, insurance companies, and governments to make more informed cultivate and insurance decisions, and therefore increase the benefit of these insurance programs to farmers. The results suggest that climate forecasts, combined with agriculture policies and insurance, can play an important role in securing farmers’ profits and providing climate risk management guidance for agriculture production.

Keywords: agricultural insurance; production function; government policy; climate forecast (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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