Adaptive local parametric estimation of crop yields: implications for crop insurance rate making

Zhiwei Shen, Martin Odening and Ostap Okhrin

European Review of Agricultural Economics, 2018, vol. 45, issue 2, 173-203

Abstract: The estimation model of crop yields is a prerequisite for deriving actuarially sound insurance premiums. A major challenge in estimating crop yield models arises from the non-stationarity of the data generating process due to technological change and climate change. In this paper, we introduce an adaptive local parametric approach to deal with the non-stationarity of crop yields. An empirical application to major crops in the USA indicates that yield risks for corn and cotton are decreasing, but are increasing for winter wheat. A rating analysis suggests that the proposed model shows potential to obtain more accurate rates than commonly used methodology.

Keywords: crop yields; crop insurance pricing; local parametric approach (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (3)

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