Agricultural Policy Evaluation

Here are the list of research project I am working on under Agricultural Policy, Resource Use, and the Environment. At the moment, my primary focus is on crop insurance, its design and its implications on water use.

Research Project 1: The impacts of crop insurance on irrigation behavior (with Paloch Suchato, Karina Schoengold, and Timothy Foster)

Mieno, Cory, and Lilyan (forthcoming) has shown that Actual Production History (APH) plays a critical role in determining input use under major crop insurance products, such as Yield Protection, Revenue Protection which base their premium and indemnity payments on APH. It showed that agricultural producers may use more (not less!) risk-decreasing inputs under such insurance products. This project examines how those insurance products affect irrigation behavior using a stochastic dynamic programming approach in conjunction with yield distribution conditional on irrigation amount estimated by APSIM (a crop simulation model). Geographic focus of the study is Ogallala aquifer portion of Nebraska, Kansas, Colorado, and Texas.

Research Project 2: The importance of well yield for premium rate design (with Paloch Suchato, Karina Schoengold, and Timothy Foster)

Whether crop insurance design is actuarially fair or not has been a hot discussion point. Failure to take into account factors that affect yield distribution necessarily cause inefficiency in premium rate design. For example, Woodard et al (2017) showed that incorporating soil characteristics can help alleviate the gap between expected indemnity and premium payments. For irrigated agriculture, one of the potentially important factor is well yield. As shown in Foster and Brozovic (2014) well yield plays a crucial role in production risks. As well yield declines, producers are less capable of catching up with water requirement, thus increasing production risk. As of now, well yield is not taken into account when determining premium rates for irrigated fields. This project will examine the potential of efficiency gains introduced by incorporating well yield in premium payments calculation.