Revenue Risk Reduction Impacts of Crop Insurance in a Multi-Crop Framework
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This study develops a multi-crop insurance model which is employed to evaluate crop
insurance decisions when several crops are produced jointly. The results suggest that the
diversification effects derived from producing multiple crops can substantially alter the
risk reduction impacts of crop insurance versus if the decision is viewed from the
perspective of a single crop. Further, the relatedness of crop production and price
responses among crops differs considerably across insurance products and strategies.
As a result, insurance strategies that might provide the maximum risk reduction for an
individual crop do not necessarily carry over to the multi-crop case.