Despite the potential benefits of larger datasets for crop insurance ratings, pooling yields with similar distributions is not a common practice. The current USDA-RMA county insurance ratings do not consider information across state lines, a politically driven assumption that ignores a wealth of climate and agronomic evidence suggesting that growing regions are not constrained by state boundaries. We test the appropriateness of this assumption, and provide empirical grounds for benefits of pooling datasets.
We find evidence in favor of pooling across state lines, with poolable counties sometimes being as far as 2,500 miles apart. An out-of-sample performance exercise suggests our proposed pooling framework out-performs a no-pooling alternative, and supports the hypothesis that economic losses should be expected as a result of not adopting our pooling framework. Our findings have strong empirical and policy implications for accurate modeling of yield distributions and vis-à-vis the rating of crop insurance products.
|Advisor:||Tack, Jesse B.|
|Commitee:||Coble, Keith H., Harri, Ardian|
|School:||Mississippi State University|
|School Location:||United States -- Mississippi|
|Source:||MAI 51/02M(E), Masters Abstracts International|
|Subjects:||Economics, Agricultural economics|
|Keywords:||Crop insurance, Pooling, Yield distribution|
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