When Less Is More: On the Use of Historical Yield Data with Application to Rating Area Crop Insurance Contracts Academic Article uri icon

abstract

  • AbstractCrop insurance is the cornerstone program of domestic farm policy in most developed countries. Although most countries rating methodology corrects for time-varying movements in the first two moments, it is unclear whether using the entire yield series remains appropriate. We use distributional tests and an out-of-sample retain-cede rating game to answer whether governments/insurers should historically trim yields in estimating their premium rates. Despite small sample sizes and the need to estimate tail probabilities, the historical data appear to be sufficiently different such that trimming is justified.

published proceedings

  • Journal of Agricultural and Applied Economics

author list (cited authors)

  • Liu, Y., & Ker, A. P.

citation count

  • 3

complete list of authors

  • Liu, Yong||Ker, Alan P

publication date

  • May 2020