information value and risk premium in agricultural production the case of split nitrogen application for corn this article considers an agricultural production model of sequential nitrogen application under risk because of random shocks between subsequent production stages optimal fertilization decisions depend on the magnitude of farmers risk aversion risk premium and the possibility for farmers to process information value of information we propose a joint estimation procedure of technology and risk aversion parameters using a structural simulation based econometric procedure parameter estimates allow to compute both the value of information and the risk premium which account for about 30 of fertilizer cost for midwest corn producers

an expected indemnity approach to the measurement of moral hazard in crop insurance a definition of moral hazard in multiple peril crop insurance is proposed that focuses on expected indemnities rather than input use five years of production and insurance data for a panel of kansas wheat farms is used to empirically test for this type of moral hazard results suggest that moral hazard affects multiple peril crop insurance indemnities in poor production years but that no significant moral hazard occurs in years when growing conditions are favorable

input demand under yield and revenue insurance 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

quasi option value some misconceptions dispelled abstract we discuss a couple of important issues in the recent literature on quasi option value we show that the assertion that quasi option value can be negative in a model with independent learning is based on confusion between quasi option value which is always positive and the net benefit of preservation of a natural environment subject to development which is not we also explore the significance of different assumptions about the nature of learning and show that the result that quasi option value is positive is surprisingly robust

rural electricity in the philippines planning issues abstract the government of the philippines is committed to reducing the country s dependence on imported oil an element in its plan to accomplish this goal is the generation of electricity using indigenous energy sources wood biomass hydro geothermal and coal wood fired generation in the philippines has drawn worldwide attention from other developing countries interested in embarking on similar programmes this investigation reveals the difficulties inherent in implementing such a programme primary concerns include the institutional issues in the generation and distribution of power by the national power corporation npc the national electrification administration nea the rural electric cooperatives recs and the tree farmer associations tfas the influence of demand patterns on the financial viability of rural electric cooperatives and the influence of low load factors small size and remote locations on the cost of dendro thermal power plants the conclusions s should be of interest to other countries interested in pursuing similar programmes

climate trade and water a grand coalition the paper argues first that the climate trade and water communities should leave aside their prejudices and it provides clear evidence that the three communities confront the same vested interests when trying to solve their common problem of free riding then it argues that such strong similarities speak in favour of sister world regimes in these three domains these sister regimes should first share the key principles of non discrimination national treatment and most favored nation embodied in the wto second by contrast the climate and water communities should review the other wto rules in order to adapt them to their specific demands when needed interestingly when doing so these two communities may provide much needed inspiration for improving some rules of the current trade regime finally the climate and water regimes may also adopt provisions on pricing that are not needed by the trade regime which deals mostly with well functioning markets

input use decisions with greater information on crop conditions implications for insurance moral hazard and the environment emerging precision agriculture technologies allow farms to make input decisions with greater information on crop conditions this greater information occurs by providing improved predictions of crop yields using remote sensing and crop simulation models and by allowing farms to apply inputs within the growing season when some crop conditions are already realized we use a stylized model with uncertainty in yield and price to examine how greater information on crop conditions i e a forecast affects input use for insured and uninsured farms we show that moral hazard decreases farms apply more inputs as the forecast accuracy improves when the forecast indicates good yields and vice versa when the forecast indicates bad yields in the long run moral hazard decreases in response to an improvement in forecast accuracy even though moral hazard decreases in the long run indemnity payments are likely to increase in the long run driven by the increase in moral hazard when the forecast indicates bad crop conditions we use the results of our model to discuss the potential impact of different technologies and types of inputs on the federal crop insurance program and the environment

political economy aspects of climate change mitigation efforts regardless of the policies used to mitigate climate change a positive and relatively high price of carbon will have to be established with slow convergence across regions leading to huge rents up to capture way beyond those that have been fought over in the general agreement on tariffs and trade gatt based international trading system the paper explores the political economy feasibility and desirability implications of the two main alternatives a carbon tax and a cap and trade cat system having the same concerns cat systems in the eu and the us have accounted for different outcomes in each case likely leakages under foreseeable carbon prices are estimated to be small and not of an order of magnitude justifying the special allowances sought across a wide spectrum of industries the experience of the eu and us reviewed here suggests that mitigation is likely to continue to be carried out under a cat provided permits are distributed for free to the lobbies whose support is necessary to get adoption of mitigation policies this quota mechanism long used to allocate scarcity in the international trading system both nationally and internationally would end up with the most powerful receiving the quotas rents giving them the leverage and resources to maintain allocation schemes favourable to them

does antidumping use contribute to trade liberalization in developing countries some supporters of antidumping have argued that this procedure serves as a kind of safety valve for protectionist pressure in this paper we investigate whether there is empirical evidence that the use of antidumping actions has contributed to ongoing tariff reductions over the period 1988 to 2004 in a sample of 23 developing countries some of which have become aggressive users of antidumping in recent years the evidence is not supportive of the safety valve argument for these countries instead evidence suggests that past use of antidumping may have led to less rather than more trade liberalization

on the role of information in decision making the case of sorghum yield in burkina faso this paper investigates the role of temporal uncertainty and information issues in economic decisions it shows that the nature of the economic environment e g the production technology can influence the valuation of information which in turn affects the choice functions this is illustrated by an empirical application to sorghum yield response analysis in burkina faso the paper stresses the importance of technology and information valuation in risk behaviour

insurance moral hazard and chemical use in agriculture this paper examines how crop insurance affects corn farmers fertilizer and pesticide use in the u s midwest crop insurance might be expected to affect chemical use because of moral hazard insured farmers may undertake riskier production than do uninsured farmers results suggest that insurance exerts considerable influence on corn farmers chemical use decisions those purchasing insurance applied significantly more nitrogen per acre 19 spent more on pesticides 21 and treated more acreage with both herbicides and insecticides 7 and 63 than did those not purchasing insurance these results suggest that both fertilizer and pesticides may be risk increasing inputs

impacts of federal crop insurance on land use and environmental quality this article integrates economic and biophysical models to assess how federal crop revenue insurance programs affect land use cropping systems and environmental quality in the u s corn belt region the empirical framework includes econometric models that predict land conversion and crop choices at the parcel level based on expectation and variance of crop revenues land quality climate conditions and physical characteristics at each site the predictions are then combined with site specific environmental production functions to determine the effect of revenue insurance on nitrate runoff and leaching soil water and wind erosion and carbon sequestration results suggest that federal crop insurance has on average a small effect on conversions of non cropland to cropland and somewhat more significant impacts on crop choice and crop rotation these changes in cropping systems have on average small impacts on agricultural pollution

supply response to agricultural insurance risk reduction and moral hazard effects this paper examines the consequences of agricultural insurance for expected supply the effect of insurance is shown to decompose into a risk reduction effect as well as a moral hazard effect the direction and magnitude of these effects depend on the parameters of the insurance contract producer s risk preferences and the underlying technology two models are considered for this purpose in the first model widely employed in the literature a producer controls only one input the second model uses a dual approach to extend the results to the case where a producer controls multiple inputs

endogenous information adverse selection and prevention implications for genetic testing policy we examine public policy toward the use of genetic information by insurers individuals engage in unobservable primary prevention and have access to different prevention technologies thus insurance markets are affected by moral hazard and adverse selection individuals can choose to take a genetic test to acquire information about their prevention technology information has positive decision making value that is individuals may adjust their behavior based on the result of the test however testing also exposes individuals to uncertainty over the available insurance contract so called classification risk which lowers the value of information in our analysis we distinguish between four different policy regimes determine the value of information under each regime and associated equilibrium outcomes on the insurance market we show that the policy regimes can be pareto ranked with a duty to disclose being the preferred regime and an information ban the least preferred one

information and the concept of option value this paper examines the arrow fisher henry concept of option value and analyzes its properties including its relationship to the value of information and the effects of increasing uncertainty about the future consequences of irreversible development it is shown that this option value is distinct from but bounded by the value of information in the overall decision problem also it is distinct from a concept of option value that appears in b s bernanke quart j econom 98 85 106 1983 however when there is a continuum of development levels rather than a binary choice between full development and no development some of these conclusions need to be modified

rainfall forecasts weather and wages over the agricultural production cycle we look at the effects of rainfall forecasts and realized rainfall on equilibrium agricultural wages over the course of the agricultural production cycle we show theoretically that a forecast of good weather can lower wages in the planting stage by lowering ex ante out migration and can exacerbate the negative impact of adverse weather on harvest stage wages using indian household panel data describing early season migration and district level planting and harvest stage wages over the period 2005 2010 we find results consistent with the model indicating that rainfall forecasts improve labor allocations on average but exacerbate wage volatility because they are imperfect

an empirical analysis of acreage effects of participation in the federal crop insurance program the extent to which crop insurance programs have resulted in additional land being brought into production has been a topic of considerable debate we consider multiequation structural models of acreage response insurance participation crp enrollment and input usage our analysis focuses on corn and soybean production in the corn belt and wheat and barley production in the upper great plains our results confirm that increased participation in insurance programs provokes statistically significant acreage responses in some cases though the response is very modest in every case in the most extreme cases 30 decreases in premiums as a result of increased subsidies provoke acreage increases ranging from 0 2 to 1 1 a number of policy simulations involving increases in premium subsidies are considered

sequential decision making in production models single equation estimates of production models usually are justified by the assumption that production inputs are chosen as part of a one period decision problem yet most production decisions in agriculture are made sequentially in this paper the farmer s optimal input choices are modeled as optimal controls in a stochastic control problem a two period cobb douglas example is used to show that sequential solutions to production problems may yield models which require either single equation or simultaneous equation estimators functional separability stochastic specification and behavior under uncertainty are discussed in the context of dynamic production models

the value of genetic information in the life insurance market abstract this paper analyzes the effects of additional information in a life insurance market under adverse selection individuals have an incentive to acquire information about their risk type if their informational status cannot be observed by insurers in aggregate however the existence of a testing opportunity has an effect on the equilibrium premium we describe the conditions under which from an ex ante standpoint all individuals gain all lose or in which some gain and some lose from the existence of the test

the value of weather information in market equilibrium increased accuracy of weather forecasts does not necessarily increase commodity supply or farmer welfare this study presents a stylized model of competitive production with rational expectations and demonstrates that improved weather information harms farmers facing an inelastic demand contrary to the conclusions of previous studies the decline in farmer welfare does not require an expansion in expected supply better weather information may signal farmers to produce less on average under an inelastic demand a supply decrease occurs when increases in the physical productivity of applied inputs are dominated by adverse price consequences

insurability and moral hazard in agricultural insurance markets pareto optimal and constrained pareto optimal all risk insurance contracts are studied conditions required for emergence of competitive insurance markets are isolated and discussed full insurance contracts are shown to be dominated by contracts involving coinsurance and deductibles if insurers are pseudo risk averse the effect of moral hazard on all risk agricultural insurance indemnity schedules is examined results for indemnity schedules under moral hazard and constant absolute risk aversion show that providing farmers with the incentives to take appropriate actions may imply lower deductibles in the presence of moral hazard than in the absence of moral hazard

implementing carbon tariffs a fool s errand some governments are considering taxes on imports based on carbon content from countries that have not introduced climate change policies such carbon border taxes appeal to domestic industries facing higher charges for their own carbon emissions this research demonstrates that there are enormous practical difficulties surrounding such plans various policies are evaluated according to world trade organization compliance administrative plausibility help in meeting environmental goals and ability to deal with domestic pressures the steel industry is used as a case study in this analysis all considered policies arguably fail to meet at least one of these constraints bringing into question the plausibility that a carbon border tax can be practical policy