Insurance premiums and GM traits
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An argument in favor of the development of genetically modified (GM) hybrids is that their presence is considered to be risk decreasing., and hence, insurance premiums for US corn growers who plant approved hybrids have been reduced. In this study we investigate, using a large set of experimental data, whether the presence in a corn hybrid of various combinations of GM traits is likely to affect production variability and downside risk. We estimate a heteroskedastic production function that allows for the variance of yield to change with the level of inputs, and use the residuals of the mean function to estimate the marginal effect of each input on variance and skewness of yield. The results show that the presence of most combinations of GM traits leads to an increase in both yield variability and downside risk.