Year: 1996
Type: article
Abstract: Previous studies disagree on the effects of insurance on fertilizer application rates. The effect of increased fertilizer on the probability of low yields primarily determines whether fertilizer and insurance are substitutes or complements. We estimate conditional distributions of corn yields to determine if the technical relationship between yields and fertilizer supports the hypothesis that insurance increases optimal application rates. Our results indicate no support for this hypothesis. At all nitrogen fertilizer rates and reasonable levels of risk aversion, nitrogen fertilizer and insurance are substitutes, suggesting that those who purchase insurance are likely to decrease nitrogen fertilizer applications.
DOI: 10.2307/1243713
Authors: Bruce A. Babcock, David A. Hennessy
Institutions: Iowa State University, Washington State University
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
SDG: Zero hunger
Open Access status: green
OpenAlex ID: W1989679018