Factors Influencing Farmers' Crop Insurance Decisions

Abstract

Farmers' decisions to purchase crop insurance and their choices among alternative products are analyzed using a two-stage estimation procedure. The influences of risk perceptions, competing risk management options, as well structural and demographic differences are evaluated. The likelihood for crop insurance usage is found to be higher for larger, older, less tenured, more highly leveraged farms, and by those with higher perceived yield risks. The marginal effects of size, age, perceived yield risk, perceived importance of risk management activities, and other structural and demographic variables are identified in terms of their influences on choices among alternative crop insurance products. Copyright 2004, Oxford University Press.