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A NOTE ON THE VIABILITY OF RAINFALL INSURANCE

A NOTE ON THE VIABILITY OF RAINFALL INSURANCE Australian Journal of Agricultural Economics, Vol. 30, No. 1 (April 1986), pp. 63-69 A NOTE ON THE VIABILITY OF RAINFALL INSURANCE JOHN QUIGGIN Australian National University, Can berva, A CT 260 1 Although policy measures aimed at mitigating the uncertainty facing farmers have generally been focused on price uncertainty, the main problem for many industries, notably the wheat industry, is yield uncertainty (Piggott 1978). For this reason, several writers have discussed the possibility of insurance against unpredictable events such as drought as a means of reducing uncertainty (Industries Assistance Commission 1978; Quiggin and Anderson 1979; Freebairn 1982). Two main points have emerged from this discussion. First, because of the high correlation among risks, pooling of the sort which makes, say, motor vehicle insurance attractive, will not be very effective. This explains the failure of rainfall insurance schemes to emerge spontaneously as a result of mutual arrangements between farmers. Second, such schemes can be viable only if they are backed by a large pool of assets such as that held by governments or large (perhaps multinational) insurance organisations. A recent paper by Bardsley, Abey and Davenport (1984) provides a formal model in which the economics of rainfall insurance can be http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Australian Journal of Agricultural Resource Economics Wiley

A NOTE ON THE VIABILITY OF RAINFALL INSURANCE

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References (2)

Publisher
Wiley
Copyright
Copyright © 1986 Wiley Subscription Services, Inc., A Wiley Company
ISSN
1364-985X
eISSN
1467-8489
DOI
10.1111/j.1467-8489.1986.tb00453.x
Publisher site
See Article on Publisher Site

Abstract

Australian Journal of Agricultural Economics, Vol. 30, No. 1 (April 1986), pp. 63-69 A NOTE ON THE VIABILITY OF RAINFALL INSURANCE JOHN QUIGGIN Australian National University, Can berva, A CT 260 1 Although policy measures aimed at mitigating the uncertainty facing farmers have generally been focused on price uncertainty, the main problem for many industries, notably the wheat industry, is yield uncertainty (Piggott 1978). For this reason, several writers have discussed the possibility of insurance against unpredictable events such as drought as a means of reducing uncertainty (Industries Assistance Commission 1978; Quiggin and Anderson 1979; Freebairn 1982). Two main points have emerged from this discussion. First, because of the high correlation among risks, pooling of the sort which makes, say, motor vehicle insurance attractive, will not be very effective. This explains the failure of rainfall insurance schemes to emerge spontaneously as a result of mutual arrangements between farmers. Second, such schemes can be viable only if they are backed by a large pool of assets such as that held by governments or large (perhaps multinational) insurance organisations. A recent paper by Bardsley, Abey and Davenport (1984) provides a formal model in which the economics of rainfall insurance can be

Journal

The Australian Journal of Agricultural Resource EconomicsWiley

Published: Apr 1, 1986

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