EX ANTE EVALUATION OF INDEX-BASED CROP INSURANCE EFFECTIVENESS

Raushan Bokusheva () and Gunnar Breustedt

No 43957, 2008 International Congress, August 26-29, 2008, Ghent, Belgium from European Association of Agricultural Economists

Abstract: The paper evaluates the effectiveness of several index-based crop insurance schemes by comparing results from two alternative evaluation approaches. We apply the common ex post approach from the literature by specifying and evaluating insurance contracts by means of the data for the same historical period. We introduce an ex ante evaluation approach by distinguishing between two consecutive periods in the available time series: the first period is used for determining insurance parameters and optimal number of farmer’s insurance contracts; and the subsequent one is considered for the evaluation of the risk reduction due to the insurance contract defined as in the first period. Our empirical results based on the data for 40 grain producers in Kazakhstan indicate that the common ex post approach overestimates the risk reduction substantially for most index insurance schemes. Additionally, the ex post approach seems to cause the overestimation of index-based insurance effectiveness primarily due to differences in the estimates of the optimal insurance contracts’ number rather than due to differences in the insurance contract parameters’ estimates.

Keywords: Risk; and; Uncertainty (search for similar items in EconPapers)
Pages: 10
Date: 2008
New Economics Papers: this item is included in nep-ias
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:eaae08:43957

DOI: 10.22004/ag.econ.43957

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