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Modelling the switch from hail insurance to antihail nets

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  • Marco Rogna
  • Günter Schamel
  • Alex Weissensteiner
Abstract
We analyse the impact of the antihail net promotion on the actuarial soundness of the hail insurance market. Specifically, we present a simple model showing that, in the presence of an imperfect insurance market, incentives for antihail nets could cause low‐risk farmers to exit the insurance market more likely than high‐risk ones. This induces a typical adverse selection problem. The theoretical model predictions are corroborated by an empirical investigation. Based on a fixed‐effect conditional logit regression, we show that a higher per‐hectare output value and a location strongly affected by hail both increase the chance that a plot is hedged through antihail nets.

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  • Marco Rogna & Günter Schamel & Alex Weissensteiner, 2023. "Modelling the switch from hail insurance to antihail nets," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 67(1), pages 118-136, January.
    • Handle: RePEc:bla:ajarec:v:67:y:2023:i:1:p:118-136
    DOI: 10.1111/1467-8489.12499
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    Cited by:

    1. Lu, Pei Jyun & Skidmore, Mark, 2024. "Efficacy analysis of cloud seeding policy for hail suppression in Kansas agriculture," 2024 Annual Meeting, July 28-30, New Orleans, LA 343940, Agricultural and Applied Economics Association.

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    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy

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