Seasonal Climate Forecasts and Agricultural Risk Management: Implications for Insurance Design

Miguel Carriquiry and Walter Baethgen ()
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Walter Baethgen: International Research Institute for Climate and Society, The Earth Institute at Columbia University (United States)

No 16-03, Documentos de Trabajo (working papers) from Instituto de Economía - IECON

Abstract: Seasonal climate forecasts and insurance are two instruments with potential to help manage risks in agricultural production. While both instruments play a distinct role in practice, they interact among themselves and with other production decisions. In particular, we contend that the progress in climate science in providing increasingly accurate seasonal forecasts has implications for the design of agricultural insurance. Early information regarding likely growing conditions will result in shifts in the expected distribution of crop yields, and the payouts associated with an insurance contract. The magnitude of these effects is illustrated using a combination of crop simulation models, and Monte Carlo techniques.

Keywords: Agricultural risk; Index insurance, Insurance, Seasonal climate forecast (search for similar items in EconPapers)
JEL-codes: G22 Q1 Q54 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2016-04
New Economics Papers: this item is included in nep-agr, nep-env and nep-ias
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https://hdl.handle.net/20.500.12008/7171

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Persistent link: https://EconPapers.repec.org/RePEc:ulr:wpaper:dt-03-16

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