A model for evaluating farmers' demand for ( crop) insurance: applications in Mexico and Panama.

Abstract

Using farm planning models, measures the income forgone due to crop diversification and relates this cost to the premium farmers would be willing to pay for insurance. While the main contribution is the provision of a model to evaluate crop insurance schemes at the farm level, the analysis does provide important empirical results for Mexico and Panama. Shows the need to evaluate crop insurance schemes simultaneously with the farmer's other decisions and to take formal account of covariances between activities. In terms of implications for insurance, the results for Mexico show that crop insurance for maize and beans would require a subsidy of two-thirds or more of the total cost to be attractive to farmers in the rain-fed areas. The results for a high risk region in Panama are more encouraging for insurance. However, results for other regions more representative of Panamanian agriculture suggest that farmers would not pay the full cost of insurance. -from Editors