{"id":9599,"date":"2018-05-03T09:00:48","date_gmt":"2018-05-03T14:00:48","guid":{"rendered":"http:\/\/72.52.184.4\/~cropinsuranceina\/?p=9599"},"modified":"2018-05-02T11:34:08","modified_gmt":"2018-05-02T16:34:08","slug":"new-crop-insurance-study-provides-valuable-farm-bill-insight","status":"publish","type":"post","link":"https:\/\/iripreviewsite.com\/cropinsuranceinamerica\/new-crop-insurance-study-provides-valuable-farm-bill-insight\/","title":{"rendered":"New Crop Insurance Study Provides Valuable Farm Bill Insight"},"content":{"rendered":"

U.S. taxpayers fare better when the government discounts farmers\u2019 crop insurance premiums rather than relying on unbudgeted disaster aid packages. \u00a0That\u2019s according to a recent peer-reviewed study that used a novel mathematical model to study an issue that has been difficult to analyze empirically.<\/p>\n

The study, published in the Journal of Agricultural and Resource Economics<\/em> (JARE<\/em>)<\/a>, was recognized as the publication\u2019s Outstanding Article of the Year for 2017.\u00a0 It was authored by Dr. Harun Bulut, who holds a Ph.D. in economics from Iowa State University and currently serves as a senior economist with National Crop Insurance Services (NCIS).<\/p>\n

Bulut\u2019s work specifically focuses on the choice in government policy between crop insurance and ad hoc<\/em> disaster relief as a way of addressing catastrophic risk in agriculture.\u00a0 This is a choice lawmakers currently face as they debate the 2018 Farm Bill.<\/p>\n

Federal crop insurance has become a pillar of U.S. farm policy in recent years and is being considered by policymakers around the world. \u00a0As it stands, farmers collectively spend $3.5 to $4 billion from their own pockets to purchase insurance protection a year.<\/p>\n

Even though it has become the top choice for farmers in mitigating risks, some critics still pan the public\u2019s cost in reducing insurance premiums and are targeting the policy for cuts.<\/p>\n

Since crop insurance\u2019s rise, annual disaster bills, which are fully funded by taxpayers and used to be the norm, have been largely reduced. \u00a0That\u2019s been welcomed news for farmers since the disaster bills of the past were often politically motivated and were slow to deliver relief.<\/p>\n

Prior research in this arena offered a variety of reasons for government support of crop insurance. \u00a0But the research did not take into account the underlying tradeoff between insurance use and ad hoc<\/em> disaster aid in what economists refer to as an equilibrium model.\u00a0 In particular, econometric evaluations of farmers\u2019 demand response when premium rates rise and fall have been of limited value, as explained in the article.<\/p>\n

With a unique approach using mathematical game theory, Bulut was able to demonstrate that policy proposals calling for reductions in premium support may be underestimating the resulting demand response for crop insurance and the increased pressure for disaster aid packages.<\/p>\n

Bulut\u2019s work offers a reason for underinsurance in the absence of premium support in that \u201cboth disaster aid expectations and overconfidence drive a wedge between the actuarially estimated price and the price that is \u2018fair\u2019 from the farmers\u2019 point of view.\u201d<\/p>\n

In the mathematical model, the cost arising from insurance premium support is found to be much less than would-be cost from ad hoc<\/em> disaster aid in the absence of a viable crop insurance option. \u00a0The findings also imply that disaster aid can be used at a much lower level in the future but may not be eliminated.<\/p>\n

Bulut\u2019s work suggests that it will be important for lawmakers to recognize the reduced insurance participation and increased likelihood for ad hoc <\/em>assistance associated with the proposals being championed by farm policy critics during the ongoing Farm Bill debate.<\/p>\n","protected":false},"excerpt":{"rendered":"

U.S. taxpayers fare better when the government discounts farmers\u2019 crop insurance premiums rather than relying on unbudgeted disaster aid packages. \u00a0That\u2019s according to a recent peer-reviewed study that used a […]<\/p>\n","protected":false},"author":22,"featured_media":9600,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[32,35,25],"tags":[],"class_list":["post-9599","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-farm-policy","category-industry-insight","category-whats-cropping-up"],"yoast_head":"\nNew Crop Insurance Study Provides Valuable Farm Bill Insight - Crop Insurance Keeps America Growing<\/title>\n<meta name=\"description\" content=\"U.S. taxpayers fare better when the government discounts farmers\u2019 crop insurance premiums rather than relying on unbudgeted disaster aid packages. 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