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Agricultural Economics

Iowa State University

Mean yields estimation

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Using A Farmer's Beta For Improved Estimation Of Expected Yields, Miguel A. Carriquiry, Bruce Babcock, Chad E. Hart Apr 2008

Using A Farmer's Beta For Improved Estimation Of Expected Yields, Miguel A. Carriquiry, Bruce Babcock, Chad E. Hart

Economics Publications

Effects of sampling error in estimation of farmers' mean yields for crop insurance purposes and their implications for actuarial soundness are explored using farm- level corn yield data in Iowa. Results indicate that sampling error, combined with nonlinearities in the indemnity function, leads to empirically estimated insurance rates that exceed actuarially fair values. The difference depends on the coverage level, the number of observations used, and the participation strategy followed by farmers. A new estimator for mean yields based on the decomposition of farm yields into systemic and idiosyncratic components is proposed, which could lead to improved rate-making and reduce ...