Modeling Texas Dryland Cotton Yields, With Application to Crop Insurance Actuarial Rating Report as inadecuate




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Texas dryland upland cotton yields have historically exhibited greater variation and moredistributional irregularities than the yields of other crops, raising concerns thatconventional parametric distribution models may generate biased or otherwise inaccuratecrop insurance premium rate estimates. Here, we formulate and estimate regime-switchingmodels for Texas dryland cotton yields in which the distribution of yield is conditioned onlocal drought conditions. Our results indicate that drought-conditioned regime-switchingmodels provide a better fit to Texas county-level dryland cotton yields than conventionalparametric distribution models. They do not, however, generate significantly differentGroup Risk Plan crop insurance premium rate estimates.

Keywords: actuarial rating ; adverse selection ; cotton ; crop insurance ; group risk plan ; regime-switching ; yield distribution

Subject(s): Agribusiness

Crop Production/Industries

Farm Management

Issue Date: 2008-04

Publication Type: Journal Article

PURL Identifier: http://purl.umn.edu/45522 Published in: Journal of Agricultural and Applied Economics, Volume 40, Number 1 Page range: 239-252

Total Pages: 14

JEL Codes: Q10; Q14; Q18

Series Statement: JAAE

Record appears in: Southern Agricultural Economics Association (SAEA) > Journal of Agricultural and Applied Economics





Author: Chen, Shu-Ling ; Miranda, Mario J.

Source: http://ageconsearch.umn.edu/record/45522?ln=en







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