Managing Catastrophic Risk in Agriculture through Ex Ante Subsidized Insurance or Ex Post Disaster Aid
We consider a political economy in which government cares about risk-averse farmers' loss of income but incurs political cost if it provides monetary support to farmers. Farmers' expectations of government disaster aid and overconfidence (optimism bias) regarding their risk prevent farmers...
| Main Author: | |
|---|---|
| Format: | Article |
| Language: | English |
| Published: |
Western Agricultural Economics Association
2017-09-01
|
| Series: | Journal of Agricultural and Resource Economics |
| Subjects: | |
| Online Access: | https://ageconsearch.umn.edu/record/264070 |
| _version_ | 1818879627180900352 |
|---|---|
| author | Harun Bulut |
| author_facet | Harun Bulut |
| author_sort | Harun Bulut |
| collection | DOAJ |
| description | We consider a political economy in which government cares about risk-averse farmers' loss of income but incurs political cost if it provides monetary support to farmers. Farmers' expectations of government disaster aid and overconfidence (optimism bias) regarding their risk prevent farmers from purchasing full insurance under actuarially fair rates. Considering this conclusion, government prefers to subsidize farmers' purchases of insurance ex ante rather than solely relying on disaster aid ex post. The resulting subsidy rate depends on the political environment, the degree of systemic risk, the distribution of farmers' risk preferences, and the nature and distribution of farmers' risk perceptions. |
| first_indexed | 2024-12-19T14:33:05Z |
| format | Article |
| id | doaj.art-7c08fd9d5fac497c8dc4ad98ea32746f |
| institution | Directory Open Access Journal |
| issn | 1068-5502 2327-8285 |
| language | English |
| last_indexed | 2024-12-19T14:33:05Z |
| publishDate | 2017-09-01 |
| publisher | Western Agricultural Economics Association |
| record_format | Article |
| series | Journal of Agricultural and Resource Economics |
| spelling | doaj.art-7c08fd9d5fac497c8dc4ad98ea32746f2022-12-21T20:17:23ZengWestern Agricultural Economics AssociationJournal of Agricultural and Resource Economics1068-55022327-82852017-09-0142340642610.22004/ag.econ.264070264070Managing Catastrophic Risk in Agriculture through Ex Ante Subsidized Insurance or Ex Post Disaster AidHarun BulutWe consider a political economy in which government cares about risk-averse farmers' loss of income but incurs political cost if it provides monetary support to farmers. Farmers' expectations of government disaster aid and overconfidence (optimism bias) regarding their risk prevent farmers from purchasing full insurance under actuarially fair rates. Considering this conclusion, government prefers to subsidize farmers' purchases of insurance ex ante rather than solely relying on disaster aid ex post. The resulting subsidy rate depends on the political environment, the degree of systemic risk, the distribution of farmers' risk preferences, and the nature and distribution of farmers' risk perceptions.https://ageconsearch.umn.edu/record/264070agricultural insuranceagricultural riskcatastrophic riskdisaster reliefoptimism biasoverconfidencestackelberg equilibriumsystemic risk |
| spellingShingle | Harun Bulut Managing Catastrophic Risk in Agriculture through Ex Ante Subsidized Insurance or Ex Post Disaster Aid Journal of Agricultural and Resource Economics agricultural insurance agricultural risk catastrophic risk disaster relief optimism bias overconfidence stackelberg equilibrium systemic risk |
| title | Managing Catastrophic Risk in Agriculture through Ex Ante Subsidized Insurance or Ex Post Disaster Aid |
| title_full | Managing Catastrophic Risk in Agriculture through Ex Ante Subsidized Insurance or Ex Post Disaster Aid |
| title_fullStr | Managing Catastrophic Risk in Agriculture through Ex Ante Subsidized Insurance or Ex Post Disaster Aid |
| title_full_unstemmed | Managing Catastrophic Risk in Agriculture through Ex Ante Subsidized Insurance or Ex Post Disaster Aid |
| title_short | Managing Catastrophic Risk in Agriculture through Ex Ante Subsidized Insurance or Ex Post Disaster Aid |
| title_sort | managing catastrophic risk in agriculture through ex ante subsidized insurance or ex post disaster aid |
| topic | agricultural insurance agricultural risk catastrophic risk disaster relief optimism bias overconfidence stackelberg equilibrium systemic risk |
| url | https://ageconsearch.umn.edu/record/264070 |
| work_keys_str_mv | AT harunbulut managingcatastrophicriskinagriculturethroughexantesubsidizedinsuranceorexpostdisasteraid |