modeling skewness with the linear stochastic plateau model to determine optimal nitrogen rates accurate modeling of skewness is needed to increase the actuarial fairness of crop insurance we test day s conjecture that crop yield skewness becomes negative as nitrogen rates increase and determine how well a linear response stochastic plateau lrsp production function matches the pattern of observed skewness using four long term nitrogen experiments stillwater wheat is consistent with day s conjecture but the skewness for lahoma and altus wheat yields as well as altus cotton yields are not the lrsp assumes normal random effects and can explain only a small part of observed skewness so a new lrsp with skew normal random effects is introduced which comes closer to explaining the observed skewness and should increase the accuracy of nitrogen rate recommendations negative skewness reduced optimal nitrogen rates and positive skewness increased optimal nitrogen rates

impact of the carbon price on the integrating european electricity market we study the impact of the carbon price on the integrating electricity market in the eu our theoretical framework suggests that the price of carbon has a positive but uneven impact on electricity prices depending on the marginal production plant the carbon price may increase price differences in the short run we apply time series analysis on daily forward data from 2003 to 2011 and investigate whether we can find empirical evidence for our analytical findings our results support the hypotheses that integration in electricity prices has increased over time and that the carbon price has a positive but uneven impact on the integration of prices

econometric developments in agricultural and resource economics the first 100 years this article reviews the major contributions of agricultural and resource economists in the area of econometrics over the past 100 years early on a number of agricultural economists were in on the ground floor in terms of developing new econometric methods over time as the economics profession became more empirically oriented agricultural and resource economists increasingly assumed the role of early adopters of new econometric methods even so agricultural and resource economists continue to make useful modifications to econometric techniques in order to adapt the methods to the unique nature of the problems and applications that we study

demand heterogeneity for index based insurance the case for flexible products abstract a substantial literature has analyzed the challenges around weather index insurance yet an important design issue has been generally overlooked most index insurance products have so far been characterized by a one size fits all payout structure intended for a representative farmer at the cost of ignoring considerable heterogeneity in risk profiles this paper provides unique evidence on the ways in which heterogeneity in farmers risk exposure affects their demand for insurance we analyze a set of flexible insurance products against excess rainfall and exploit the substantial variation in insurance portfolios demanded by farmers we explore the relevance of alternative sources of heterogeneity by extending a simple expected utility decision model and relying on structural estimation to test their significance we find important aspects of farmer heterogeneity directly affecting their demand for insurance we quantify the benefits of a flexible scheme by comparing farmer welfare to that achieved under alternative counterfactual insurance options

modeling conditional yield densities given the increasing interest in agricultural risk many have sought improved methods to characterize conditional crop yield densities while most have postulated the beta as a flexible alternative to the normal others have chosen nonparametric methods unfortunately yield data tends not to be sufficiently abundant to invalidate many reasonable parametric models this is problematic because conclusions from economic analyses which require estimated conditional yield densities tend not to be invariant to the modeling assumption we propose a semiparametric estimator that because of its theoretical properties and our simulation results enables one to empirically proceed with a higher degree of confidence copyright 2003 oxford university press

the influence of temperature on spike probability in day ahead power prices it is well known that day ahead prices in power markets exhibit spikes and time varying volatility spikes and extremely high volatility are the results of short term frictions in demand and or supply conditions it is known that information on load or the reserve margin help to forecast spikes however these variables are not timely available for every market participant and this paper suggests to use temperature as a proxy interpreting the results from several switching regimes models the paper shows that the probability of spike occurrence increases when temperature deviates substantially from mean temperature levels

marriage and labor market discrimination in japan many japanese firms have engaged in the practice of compulsory retirement upon a female employees marriage in 1966 this practice was ruled as being contrary to provisions in japans civil code the authors have specified and estimated a model of the economic determinants of age at marriage in order to analyze the effect that this discrimination has had on nuptiality in japan the results indicate that on average after accounting for an upward trend women who married after the 1966 court decision married about one year younger than women who married before 1966 it is also found that age at marriage is influenced by several socioeconomic variables including wifes wage and educational level husbands income and educational level and wifes family background data are from a 1975 survey of women aged 20 59 who were living in the tokyo metropolitan area excerpt

insuring eggs in baskets the vast majority of crop and revenue insurance policies sold in the united states are single crop policies that insure against low yields or low revenues for each crop grown on a particular farm this practice of insuring one crop at a time runs counter to the traditional risk management practice of diversifying across several enterprises to avoid putting all of ones eggs in a single basket this paper examines the construction of whole farm crop revenue insurance programs to include livestock the whole farm insurance product covers crop revenues from corn and soybeans and livestock revenues from hog production the results show that at coverage levels of 95 percent or lower the fair insurance premiums for this product on a well diversified iowa hog farm are far lower than the fair premiums for the corn crop alone on the same farm the calculation of premium rates for the whole farm insurance product is derived from a method for imposing correlations first proposed by iman and conover in 1982

heterogeneity and distributional form of farm level yields representing farm level crop yield heterogeneity and distributional form is critical for risk and crop insuranceresearch moststudieshaveusedcountydata understatingbothsystematicandrandomvariation comparison of systematic versus random intra county variation is lacking few studies compare the various distributional forms that have been proposed this study utilizes the extensive potential of government farm level crop insurance data results show that systematic intra county variation is surprisingly strong a newly applied reverse lognormal distribution is preferred when county wide variation is removed but the normal distribution fits surprisingly well in the crop insurance relevant percentiles when county wide variation is not removed representing and accounting for both spatial and temporal heterogeneity is a major problem in agricultural economics and policy analysis due to the fact that most data are aggregated to at least the county level e g gardner and kramer 1986 just and pope 1999 both systematic and random components of crop yields are major factors in intra county farm level heterogeneity that are critical for modeling risk producer behavior and crop insurance participation most studies have either used aggregate at least county level data or relied on relatively few farm level observations the former makes results primarily illustrative while the latter limits statistical significance this article characterizes intra county crop yield heterogeneity both spatially and temporally with the most extensive dataset utilized to date and evaluates a broader set of parametric distributional possibilities than previously

impact of copula choice on the modeling of crop yield basis risk a number of problems in agricultural economics involve modeling joint distributions for which the assumption of multivariate normality may not be warranted yet very little work has been conducted evaluating competing methods for modeling joint dependence we develop a simulation framework to evaluate the bias and efficiency impacts of copula choice in the context of evaluating county to farm basis risk the results suggest significant differences in performance across various copulas and approaches the findings have important implications for risk analysis insurance and policy modeling problems in agriculture regarding the selection of method to model dependence among random variables

crop yield skewness under law of the minimum technology no satisfactory motivation has been forwarded in favor of any crop yield distribution including the normal this article explores the foundations of yield distributions for the law of the minimum resource constraint technology at the plot level of analysis with independent identical uniform resource availability distributions the yield skew is positive whereas it is negative whenever the distributions are normal simulations show how asymmetries in resource availabilities determine skewness it is suggested that a negative yield skew occurs whenever production is tightly controlled so that the left tails of some resources availabilities distributions are thin irrigation may increase yield skewness copyright 2009 oxford university press

are crop yields normally distributed the evidence for nonnormality of crop yields is reassessed three methodological problems are identified in typical yield distribution analyses i misspecification of the nonrandom components of yield distributions ii missreporting of statistical significance and iii use of aggregate timeseries ats data to represent farm level yield distributions one or more of these problems infect virtually all evidence against normality to date the positive contribution of the article is a set of principles that must be followed in any valid investigation of yield normality

the impacts of multiperil crop insurance on indonesian rice farmers and production this article analyzes the effect of multiperil crop insurance policy for risk averse indonesian rice farmers located in tuban and gresik regencies of the east java province based on the model comparative static analysis of a change in policy variables coverage levels and premium subsidies on input use through the coupling wealth and insurance effects are presented the comparative static results are largely ambiguous and left as empirical questions consequently the model is numerically simulated to quantify the effects of different coverage levels and subsidy rates on input use expected net insurance payments and certainty equivalents the empirical analysis shows that mpci crop insurance results in a decline in expected yield for coverage levels above about 82 5 for both regencies furthermore higher subsidy rates amplify the reduction in input use and yield therefore incomplete coverage with relatively low premium subsidies is the best policy to minimize the impact on input use and yield however from the farmers perspective the optimal policy combination results from the highest coverage level and subsidy which offer the largest expected net insurance payments and certainty equivalent

parametric and nonparametric statistical modelling of crop yield implications for pricing crop insurance contracts this article considers alternative methods to calculate the fair premium rate of crop insurance contracts based on county yields the premium rate was calculated using parametric and nonparametric approaches to estimate the conditional agricultural yield density these methods were applied to a data set of county yield provided by the statistical and geography brazilian institute ibge for the period of 1990 through 2002 for soybean corn and wheat in the state of parana in this article we propose methodological alternatives to pricing crop insurance contracts resulting in more accurate premium rates in a situation of limited data

predicting price spikes in electricity markets using a regime switching model with time varying parameters this paper shows that a stochastic regime switching model can represent the volatile behavior of wholesale electricity prices associated with price spikes effectively the structure of the model is very flexible because the mean prices in the two regimes and the two transition probabilities are functions of the load and or the implicit reserve margin using price data from the single settlement market in pjm may 1999 to may 2000 the results show that the estimated switching probability from the low to the high regime predicts price spikes well if the reserve margin is measured accurately

payment limitations and acreage decisions under risk aversion a simulation approach payment limits have played an important role in u s farm policy deliberations for the last thirty years current limits are largely nonbinding proposals to strengthen and enforce limits are currently in discussion we evaluate the likely effects of such proposals on acreage for corn soybeans wheat cotton and rice in several important producing states our results generally indicate that payment limits are unlikely to significantly affect acreage in most cases exceptions occur for cotton and rice where the probability that limits would be binding is much greater and thus more likely to affect production copyright 2009 oxford university press

the impact of weather on crop yield distribution in taiwan some new evidence from panel data models and implications for crop insurance this study examines the impact of weather on the yields of seven major crops in taiwan based on pooled panel data for 15 prefectures over the 1977 1996 period the unit root tests and maximum likelihood methods involving a panel data model are explored to obtain reliable estimates the uncertain yield outcome is incorporated into a discrete stochastic programming model to address a comparison between sector analysis with and without considerations of a crop insurance policy under different climate change scenarios simulation results suggest that crop insurance may stabilize revenues and protect farmers from exposures to increasing weather related risk

tailored to the extremes quantile regression for index based insurance contract design a new approach for weather index based insurance design based on quantile regression qr to condition the yield index dependency is developed and compared to standard regression technique three conceptual different risk measures i e expected utility expected shortfall and a spectral risk measure are used to evaluate the risk reducing properties of these contracts our findings show that qr is much more powerful in establishing the yield index dependency and lead for all risk measures to a higher risk reduction than the standard technique ordinary least squares ols thus qr leads to a more efficient contract design which is beneficial for both the insurer smaller remaining risk and the insured higher demand and willingness to pay our empirical application is based on a 31 years long time series of wheat yield data from northern kazakhstan

crop insurance valuation under alternative yield distributions considerable disagreement exists about the most appropriate characterization of farm level yield distributions yet the economic importance of alternative yield distribution specifications on crop insurance valuation has not been well documented the results of this study demonstrate that large differences in expected payouts from popular crop insurance products can arise solely from the parameterization chosen to represent yield distributions the results suggest that the frequently unexamined yield distribution specification may lead to economically significant errors in crop insurance policy rating and assessment of expected payouts from policies

conservation payments under risk a stochastic dominance approach conservation payments can be used to preserve forest and agroforest systems to explain landowners land use decisions and determine appropriate conservation payments it is necessary to focus on revenue risk marginal conditional stochastic dominance rules are used to derive conditions for determining the conservation payments required to guarantee that the environmentally preferred land use dominates an empirical application to shaded coffee protection in the biologically important choco region of west ecuador shows that conservation payments required for preserving shaded coffee areas are much higher than those calculated under risk neutral assumptions further the extant distribution of land has strong impacts on the required payments

short term variations and long term dynamics in commodity prices in this article we develop a two factor model of commodity prices that allows meanreversion in short term prices and uncertainty in the equilibrium level to which prices revert although these two factors are not directly observable they may be estimated from spot and futures prices intuitively movements in prices for long maturity futures contracts provide information about the equilibrium price level and differences between the prices for the short and long term contracts provide information about short term variations in prices we show that although this model does not explicitly consider changes in convenience yields over time this short term long term model is equivalent to the stochastic convenience yield model developed in gibson and schwartz 1990 we estimate the parameters of the model using prices for oil futures contracts and apply the model to some hypothetical oil linked assets to demonstrate its use and some of its advantages over the gibson schwartz model

female labor force participation in developing and developed countries consideration of the informal sector t he steady increase in the labor force participation of married women in the united states over the last few decades has stimulated considerable interest in the economic analysis of a woman s decision to work pioneering work by mincer 1962 and cain 1966 has served as a theoretical and empirical foundation for numerous studies of female labor force participation this research typically treats a woman s current labor force status measured as a dummy variable for the individual and as a rate for the population as a measure of labor supply which depends upon economic and demographic characteristics such as female earnings male earnings non earnings income schooling work experience age number of children and so on notable examples are bowen and finegan 1969 cogan 1975 1978 gronau 1973 heckman 1974 1980 and schultz 1980 while the associated theoretical models and statistical techniques have been refined considerably especially by lewis 1972 ben porath 1973 and heckman 1974 1979 the coefficients estimated using u s data have remained reasonably robust also there is substantial agreement among micro level and aggregate results see cain 1966 and bowen and finegan 1969 for comparisons as this body of literature has grown the economic models developed within it have been implemented to analyze the labor force behavior of women in other countries however there is no consistent international pattern in the behavioral trends of the female labor force perhaps the most notable difference in the economic opportunities available to women in many other countries is that they may work in the informal sector of the labor market women may be considered economically active and may be counted as being in the labor force as they produce goods at home for market sale work on the family farm or work in a small family run business the most convenient means of categorizing workers as being in the informal sector is by their employment status following jaffe and azumi 1960 we assume that women reported as self employed or as family workers are engaged in the informal sector of the labor force almost all women in the u s labor force work as employees only 6 6 worked as self employed or family workers in 1978 given japan s advanced economic development a surprisingly large fraction 38 4 in 1978 of its female labor force comprises self employed and family workers clearly in the united states and countries with a similar distribution of the labor force by employment status the labor force participation decision may be treated as the choice to work or not to work however if individuals regard the decision to enter the labor force as an employee as being distinct from the choice to enter the labor force as a family worker then economic models of labor force participation which treat these choices as identical will incorporate a specification bias the labor force participation decision may differ between these two sectors for several reasons first the wage offers may differ by sector second while entering the informal sector may be virtually frictionless there may be fixed costs among them commuting time and child care associated with working in the formal sector third family workers may face more flexible working schedules than paid employees the latter group may be subject to contractual working hours in order to treat the labor force decisions in coiuntines with significant informal sectors this received for publication march 16 1981 revision accepted for publication september 15 1982 rutgers university this paper is a revision of work begun with my doctoral dissertation i would like to thank h gregg lewis and t dudley wallace for their suggestions and hideo okamoto for providing the data set i would also like to thank david crawford toshiaki tachibanaki two anonymous referees and the participants of the columbia labor workshop the japan economic seminar and the yale labor and population workshop for their comments remaining errors are my own this research was supported by a postdoctoral fellowship from the national institutes of health additional funding was provided by the william and flora hewlett foundation grant to the yale economic demography program i statistical abstract of the u s and japan statistical yearbook

testing for nonnormality in farm net returns cash returns from farming are expected to be nonnormally distributed under a wide range of joint price yield distributions adequate testing for such nonnormality requires use of proper whitening procedures as well as appropriate statistics with tests and sample sizes commonly employed a false imputation of normality often will be made however positive correlation between skewness and kurtosis reduces the likelihood of associated decision errors these results are illustrated with data for

are crop yields normally distributed a reexamination this article demonstrates that normality test procedures that include individual detrending of short term panel data can severely reduce the power of normality tests and strongly bias normality tests in a type ii direction an alternative error component implicit detrending procedure is suggested that demonstrates higher power for the distributions examined both procedures are applied to a large data set with normality of yield residuals being rejected assuming normality is shown to reduce potential premium rates for a large number of producers in an existing crop insurance product

self protection from weather risk using improved maize varieties or off farm income and the propensity for insurance we investigate how self protection from the adoption of improved maize varieties imv and off farm income affects risk premiums for smallholder maize producers in uganda to unbundle these effects we specify the cost of risk to explicitly capture four risk components mean variance skewness and kurtosis using unique plot level panel data for uganda we estimate and test moments of a flexible production function based on an expanded form of the johnson su family distribution and proceed to simulate the degree of responsiveness of risk premiums and welfare estimates to marginal changes in the share of land under imv and off farm income scenarios of joint adoption of imv accompanied with low and high application of inorganic fertilizer and the effect of off farm income when there is high and low supply of farm labor are examined results show that the use of imv and off farm income substantially reduces risk premiums and the individual effect is much higher under low fertilizer application and high supply of farm labor respectively thus implying that self protection is likely to reduce the propensity for index insurance especially if its design fails to consider the reduction in downside risk

asymmetry partial moments and production risk partial moment functions are proposed as a flexible way to characterize and estimate asymmetric effects of inputs on output distributions methods for econometric estimation of partial moment functions and tests for input symmetry and location scale distributions are presented a monte carlo study demonstrates properties of proposed tests a study of ecuadorian potato production illustrates the methods hypotheses of input symmetry and location scale are rejected a risk value model based on partial moments implies that fertilizer is risk increasing and fungicides and labor are risk reducing in potato production whereas an expected utility model based on full moments has the opposite implications

heteroscedasticity or production risk a synthetic view two veins of literature namely production risk literature and stochastic frontier analysis are examined both fields are concerned of output variation the former due to exogenous shocks the latter due inefficiency by covering the literature from both the fields this review suggests that the concept of heteroscedasticity can be utilized to build a synthesis between these mainly separate branches of literature however the synthetic approach brings a challenge how to differentiate between different sources of output variation this challenge is identified as the main obstacle to meaningfully combine the two approaches

two moment decision models and expected utility maximization two moment decision models are consistent with expected utility maximization only if the choice set or the agent s preferences are restricted this paper identifies a restriction which is sufficient to ensure this consistency and confirms that it holds in many economic models the implications for economic analysis are then derived two different approaches to representing an agent s preferences over strategies yielding random payoffs are in wide use under the mean standard deviation ms approach the agent is assumed to rank the alternatives according to the value of some function defined over the first two moments of the random payoff while the expected utility eu criterion assumes that the expected value of some utility function defined over payoffs is used instead the fact that there are these two competing approaches has generated a considerable literature some authors are concerned with the advantages and disadvantages of each while others deal with conditions under which the potentially different approaches would yield the same results or at least approximately so space does not

testing day s conjecture that more nitrogen decreases crop yield skewness whilecontroversysurroundsskewnessattributesoftypicalyielddistributions abetterunderstandingis importantforagriculturalpolicyassessmentandforcrop insuranceratesetting day 1965 conjectured that crop yield skewness declines with an increase in nitrogen use at low levels but not at higher levels employing four corn yield experimental plot datasets we investigate the conjecture by introducing a a flexible bayesian extension of the just pope technology to incorporate skewness and b a quantilebased measure of skewness shift bayesian estimation provides strong evidence in favor of negative skewnessatcommercialnitrogenratesandforday sconjecture therewasweakerevidenceinfavorof positively skewed cotton yield and little evidence in favor of the conjecture the results are confirmed by the quantile based measure we also find evidence that skewness becomes more negative upon moving from corn after corn to corn after soybean

forecasting day ahead electricity spot prices the impact of the exaa to other european electricity markets abstract in our paper we analyze the relationship between the day ahead electricity price of the energy exchange austria exaa and other day ahead electricity prices in europe we focus on markets which settle their prices after the exaa which enables traders to include the exaa price into their calculations for each market we employ econometric models to incorporate the exaa price and compare them with their counterparts without the price of the austrian exchange by employing a forecasting study we find that electricity price models can be improved when exaa prices are considered

will cotton make a comeback in mali with the decline of cotton especially in the marginal cotton areas farmers have been using more of the cotton financed inputs on the cereals the cotton para statal company cmdt has made a virtue out of this recommending diversification for these regions following the world price spike in 2010 the malian government responded with a substantial price increase for cotton in 2011 of 38 to rejuvenate the malian sector this article looks at the impact of this price policy in the cotton economy and the potential of new cereal technology and marketing strategy to raise incomes and facilitate the diversification given the importance of the marketing decision of selling later after the recovery of cereal prices from the harvest collapse a discrete stochastic programming model was developed for three stage decision making then the recent changes in the cotton economy and government fertilizer subsidies were analyzed along with the introduction of the new technology marketing of sorghum cotton and maize continue to dominate the economy but the combined sorghum technology marketing increases farmers incomes by 16 to 21 and eases the return to normal cotton prices after the 2011 price spike as well as the removal of the fertilizer subsidies

the planting real option in cash rent valuation after entering into a farmland cash rent contract in the fall a tenant farmer has flexibility over the spring crop choice and the input application level failure to account for these options will bias estimates of what farmers should pay to rent land applying monte carlo simulation methods this study investigates the option values for these choices a multivariate gaussian copula mgc is employed to account for dependence among yields and prices results show that the average cash rent valuation for the real option approach is 33 6 higher than that for the conventional net present value npv method in which the input intensity option is 0 9 crop planting sequence is shown to impact the real option value

household production in the philippines a non neoclassical approach the starting point of any economic analysis is a microeconomic theory of the decision making unit by providing a set of explicit assumptions regarding individual choices a microeconomic theory lays the necessary foundation for the explanation of economic behavior just as a theory of the firm underlies analyses of market production a theory of the family underlies analyses of household production explanations of long run trends such as fertility decline grow out of assumptions regarding the nature of household decision making developing what they term the economic approach to human behavior gary becker and other neoclassical economists forcefully argue that household behavior is motivated primarily by a collective concern for economic efficiency they assume that households seek to maximize exogenously given joint utility functions and they hypothesize that differences in household behavior represent efficient responses to differences in the prices and incomes which households face this approach provides the foundation for an explanation of fertility decline based on long run changes in relative prices associated with economic development simply stated the argument runs as follows as the rate of return to human capital rises and levels of education increase the cost of rearing children goes up as higher wages draw women out of the household into the labor force the opportunity cost of mothers time goes up further increasing the cost of children the demand for children decreases and fertility levels gradually adjust 2 the assumption that joint utility functions are exogenous constant over time and vary randomly if at all across households is crucial to this argument systematic differences in unobservable joint utility functions could seriously confound the interpretation of observed relationships between changes in household behavior and changes in rela

is there a viable market for area based crop insurance the performance of area yield insurance and farm level multiple peril crop insurance is analyzed for cotton and soybean production in georgia and south carolina the analysis improves on many previous studies by utilizing actual farm level yield data and by comparing the two types of insurance products not only for actuarially fair premium rates but also for actual unsubsidized and subsidized premium rates results suggest that even in heterogeneous production regions area yield insurance may be a viable alternative to farm level insurance when premium rates for farm level insurance contain large positive wedges

u s farm policy and the volatility of commodity prices and farm revenues a dynamic three commodity rational expectations storage model is used to compare the impact of the federal agricultural improvement and reform fair act of 1996 with a free market policy and with pre fair policies results suggest that fair did not lead to significant increases in long run price volatility or revenue volatility the main impact of pre fair relative to the free market regime was to substitute government storage for private storage in a way that did little to support prices or to stabilize farm incomes results also indicate that u s grain market volatility in 1995 2000 was due to fundamental market forces and not to fair copyright 2002 oxford university press

investigating the performance of different estimation techniques for crop yield data analysis in crop insurance applications we investigate the performance of the ordinary least squares ols m mm and the theil sen ts estimator for crop yield data analysis in crop insurance applications using monte carlo simulations more specifically the performance is assessed with respect to trend estimation prediction of future yield levels and the estimation of expected indemnity payments in agreement with earlier findings other estimators are found to be superior to ols in simple regression problems if yield distributions are outlier contaminated and heteroscedastic while this conclusion is also valid for subsequent applications such as yield prediction and the estimation of expected indemnity payments the difference between the considered estimators becomes less distinct for these applications we find particularly the m estimator to be a good compromise between high breakdown very robust estimators and the very efficient ols estimator because no regression technique dominates all others in all applications and scenarios for error term distributions our results underline that the choice of the estimation technique should be dependent on the purpose of the crop yield data analysis however alternative estimators such as m mm and ts estimator can reduce and bound the risk of unreliable or inefficient crop yield data analysis in crop insurance applications

on technological change in crop yields technological changes in agriculture tend to alter the mass associated with segments or components of the yield distribution as opposed to simply shifting the entire distribution upwards we propose modeling crop yields using mixtures with embedded trend functions to account for potentially different rates of technological change in different components of the yield distribution by doing so we can test some interesting and previously untested hypotheses about the data generating process of yields for example 1 is the rate of technological change equivalent across components and 2 are the probabilities of components constant over time our results technological change is not equivalent across components and probabilities tend not to have changed significantly over time have implications for modeling yields we find estimated conditional yield densities are quite different when unique trend functions are embedded inside the mixture components versus estimating the same mixture with detrended data also we prove different rates of technological change in different components lead to nonconstant variance with respect to time i e heteroscedasticity we present two applications of the proposed yield model the first application considers climate determinants of component membership where our results are consistent with the literature for climate determinants of yields the second application compares the proposed yield model to usda s current rating methodology for area yield crop insurance contracts and finds the proposed model may lead to more accurate rates

actuarial fairness of crop insurance rates with constant rate relativities increased availability and demand for low deductible crop insurance policies have increased focus on crop insurance rating methods actuarial fairness cannot be achieved if constant multiplicative factors are used to determine how premiums change as coverage levels increase a comparison of premium rates generated by the factors used by the two most popular crop insurance products with those generated by a standard yield distribution shows that the popular insurance products overcharge for low deductible policies in most counties this overpricing may explain why large premium subsidies were required to induce farmers to move from low deductible to high deductible policies beginning in 2001 crop insurance is by far the most popular risk management tool used by the u s crop producers in 2003 the u s crop insurance program insured more than 200 million acres representing more than 37 billion in value with total premium of over 3 14 billion the two most popular crop insurance products are actual production history aph which provides insurance against low yields and crop revenue coverage crc which is a revenue insurance product both of these products offer coverage in 5 increments from 65 to 85 of expected yield or revenue beginning with the 2001 crop year congress greatly increased subsidy levels to induce producers to purchase more insurance coverage producers responded as expected for example only 2 3 of kansas wheat was insured at levels in excess of 65 in 1998 this proportion rose to 71 6 in 2003 this policy change has increased focus on the methods used by the risk management agency rma of usda to set insurance rates at higher coverage levels aph premium rates are calculated by multiplying the premium rate at the 75 coverage level by a rate

ranking crop yield models using out of sample likelihood functions there has been considerable debate regarding which probability distribution best represents crop yields this study ranks six yield densities based on their out of sample forecasting performance the forecasting ability for each density was ranked according to its likelihood function value when observed at out of sample observations results show that a semiparametric model offered by goodwin and ker best forecasts county average yields

electricity wholesale market prices in europe convergence abstract this paper tests the hypothesis that the ongoing restructuring process in the european electricity sector has led to a common european market for electricity based on a principal component analysis pca of wholesale electricity prices in 2002 2006 we reject the assumption of full market integration for several pairs of countries the weaker hypothesis of bilateral convergence is accepted based on unit root tests kpss and adf and a convergence test based on filtered pairwise price relations this indicates that the efforts to develop a single european market for electricity were so far only partially successful we show that the daily auction prices of scarce cross border transmission capacities are insufficient to explain the persistence of international price differentials empirically our findings confirm the insufficiency of explicit capacity auctions as stated in the theoretical literature

integration and shock transmissions across european electricity forward markets abstract new results are presented relating to the integration of the french german british dutch and spanish power markets at day ahead week ahead one month ahead and two month ahead lead times overall there is evidence of market integration increasing over time despite an underlying inefficiency in each market with respect to the forward and spot price convergence the spatial analysis on a financial dimension is undertaken using causality tests cointegration and impulse response techniques for both price levels and volatilities in general we find less influence of the size and proximity of neighbouring markets than other studies more integration at baseload than peak and surprisingly less integration in forwards than spot prices

estimating bivariate yield distributions and crop insurance premiums using nonparametric methods modelling crop yield distribution is crucial in crop insurance premium setting the correlation between different crop yields due to rotations or systemic risks requires estimation of joint yield distribution for multiple crops in this article we apply a nonparametric method to estimate bivariate yield distributions using farm level yield data of wheat and corn in shandong province in china then the simulated yields are used to evaluate the expected indemnity of one traditional and one hypothetical crop insurance programme our results reveal that the nonparametric bivariate method is very flexible in shaping the yield probability density functions to estimate local idiosyncrasies and correlation between two crops it is also feasible to simulate the nonparametric yield distributions at a satisfying level of accuracy the simulation results show that the hypothetical two crop insurance contract can be more affordable to farmers than traditional individual crop insurance contracts

regime jumps in electricity prices many countries are liberalizing their energy markets participants in these markets are exposed to market risk due to the characteristics of electricity price dynamics electricity prices are known to be mean reverting very volatile and subject to frequent spikes models that describe the dynamics of electricity prices should incorporate these characteristics in order to capture the price spikes many researchers have introduced stochastic jump processes but we argue and show that this specification might lead to potential problems with specifying the true amount of mean reversion within the process in this paper we propose a regime switching model that models price spikes separated from normal mean reverting prices

bayesian estimation of possibly similar yield densities implications for rating crop insurance contracts the agricultural act of 2014 solidified insurance as the cornerstone of u s agricultural policy the congressional budget office 2014 estimates that this act will increase spending on agricultural insurance programs by 5 7 billion to a total of 89 8 billion over the next decade in light of the sizable resources directed toward these programs accurate rating of insurance contracts is of the utmost importance to producers private insurance companies and the federal government unlike most forms of insurance agricultural insurance is plagued by a paucity of spatially correlated data a novel interpretation of bayesian model averaging is used to estimate a set of possibly similar densities that offers greater efficiency if the set of densities are similar while seemingly not losing any if the set of densities are dissimilar simulations indicate that finite sample performance in particular small sample performance is quite promising the proposed approach does not require knowledge of the form or extent of any possible similarities is relatively easy to implement admits correlated data and can be used with either parametric or nonparametric estimators we use the proposed approach to estimate u s crop insurance premium rates for area type programs and develop a test to evaluate its efficacy an out of sample game between private insurance companies and the federal government highlights the policy implications for a variety of crop state combinations consistent with the simulation results the performance of the proposed approach with respect to rating area type insurance in particular small sample performance remains quite promising

estimation of mixture models using cross validation optimization implications for crop yield distribution modeling a critical issue in identifying an appropriate characterization of crop yield distributions is that the best fitting distribution in an in sample framework is not necessarily the best choice out of sample this study provides a methodology for estimating flexible and efficient mixture models using cross validation that alleviates many of these associated model selection issues the method is illustrated in an application to the rating of group risk insurance products results indicate that nonparametric models often fit best in sample but are inefficient and consistently overstate true rates and vice versa for parametric models the proposed model provides unbiased rates and also has desirable efficiency properties

toward a normative theory of crop yield skewness while the preponderance of empirical studies point to negative crop yield skewness in a wide variety of contexts the literature provides few clear insights on why this is so the purpose of this paper is to make three points on the matter we show formally that statistical laws on aggregates do not suggest a normal yield distribution we explain that whenever the weather conditioned mean yield has diminishing marginal product then there is a disposition toward negative skewness in aggregate yields this is because a high marginal product in bad weather states stretches out the left tail of the yield distribution relative to that of the weather distribution turning to disaggregated yields we decompose unconditional skewness into weather conditioned skewness plus two other terms and study each in turn

spatial pattern of yield distributions implications for crop insurance crop insurance is similar to flood and hurricane insurance in that spatially correlated weather tends to cause violations of the independence assumption ideally one would seek to pool uncorrelated risk drawn from the same distribution in crop insurance this article proposes a testing procedure for the cross sectional pooling of group units and empirically analyzes whether the proposed test improves out of sample rating performance we utilize a balanced panel of u s county level corn yields for 510 counties and the results of an out of sample crop insurance rating performance exercise provide economic significance to the proposed pooling methodology and results

a history of european electricity day ahead prices in this article we examine the development of day ahead prices in five european markets which became more connected over recent years where previous studies examined the convergence of price levels over time we focus on patterns in estimates for the parameters in a switching regimes model this makes it possible to distinguish between prices under normal market conditions and under non normal market conditions those market conditions that can cause extreme price spikes we expect that increased connectivity yields additional supply in the short term and therefore will reduce the impact of price spikes our results indicate that the impact of price spikes and volatility decreased over time that prices behave more random and that the parameter estimates between various connected markets seem to have converged between the belgian dutch french german and nordic day ahead markets over the years 2003 through 2010 these results can be explained by increased connectivity and improved liquidity

spatio temporal modeling of agricultural yield data with an application to pricing crop insurance contracts this article presents a statistical model of agricultural yield data based on a set of hierarchical bayesian models that allows joint modeling of temporal and spatial autocorrelation this method captures a comprehensive range of the various uncertainties involved in predicting crop insurance premium rates as opposed to the more traditional ad hoc two stage methods that are typically based on independent estimation and prediction a panel data set of county average yield data was analyzed for 290 counties in the state of parana brazil for the period of 1990 through 2002 posterior predictive criteria are used to evaluate different model specifications this article provides substantial improvements in the statistical and actuarial methods often applied to the calculation of insurance premium rates these improvements are especially relevant to situations where data are limited

relaxing heteroscedasticity assumptions in area yield crop insurance rating this article focuses on the effect of differing heteroscedasticity assumptions on derived premium rates of area yield crop insurance tests of the proportional and absolute heteroscedasticity assumptions are conducted using both in sample and out of sample measures our results suggest that arbitrarily imposing a specific form of heteroscedasticity or homoscedasticity in insurance rate calculations limits actuarial soundness our results have practical implications for the federal crop insurance programs as we reject the traditional rating assumptions for many cotton regions and lower yielding higher risk corn and soybean counties but not in the heart of the cornbelt copyright 2011 oxford university press