American Journal of Agricultural Economics · 1996 · 178 citations · 5 references
EngineeringApplied EconomicsAgricultural EconomicsPanel DataAgricultural StatisticsResource EconomicsEconomic AnalysisInsuranceEconomicsAgricultural ImpactPrice ElasticityCrop DamageFinanceKansas Wheat FarmsAgricultural ModelingBusinessEconometricsAgricultural ManagementBinomial Probit Model
The study applies a random‑effects binomial probit model to panel data from Kansas wheat farms to examine demand for multiple‑peril crop insurance. The authors develop a theoretical framework and estimate a random‑effects binomial probit model that incorporates the first and second moments of market returns and insurance returns. Empirical analysis shows that both the first and second moments of market and insurance returns significantly influence demand, the price elasticity of demand is −0.65, and preseason weather variables are not significant, indicating no evidence of intertemporal adverse selection.
Abstract A random‐effects, binomial probit model is applied to data for a panel of Kansas wheat farms to examine Multiple Peril Crop Insurance demand. A theoretical model is developed which suggests inclusion of the moments of both market return and the return to insurance. Empirical results indicate that the first and second moments of both market return and the returns to insurance are significant. The price elasticity of demand is estimated to be −0.65. Preseason weather variables when included in the models were not found to be significant, failing to support the hypothesis of intertemporal adverse selection.
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