Valuing Agricultural Insurance
Robert G. Chambers11Robert G. Chambers is professor of Agricultural Economics at the University of Maryland.
This paper proposes a method for estimating a farmer's stochastic discount factor that is independent of his or her risk preferences, and shows that that stochastic discount factor is appropriate for calculating a farmer's willingness to pay for a crop insurance product. An empirical example illustrates how production and price data might be combined with returns data to permit econometric estimation of the stochastic discount factor, and the implications of those illustrative results are briefly discussed.
American Journal of Agricultural Economics Volume 89 Issue 3 Page 596-606, August 2007
Robert G. Chambers11Robert G. Chambers is professor of Agricultural Economics at the University of Maryland.
This paper proposes a method for estimating a farmer's stochastic discount factor that is independent of his or her risk preferences, and shows that that stochastic discount factor is appropriate for calculating a farmer's willingness to pay for a crop insurance product. An empirical example illustrates how production and price data might be combined with returns data to permit econometric estimation of the stochastic discount factor, and the implications of those illustrative results are briefly discussed.
American Journal of Agricultural Economics Volume 89 Issue 3 Page 596-606, August 2007
