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Experiments in ranching: Rain‐index insurance and investment in production and drought risk management
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2022
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Source: Applied Economic Perspectives and Policy, 44(3), 1513-1533
[PDF-2.10 MB]
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Journal Title:Applied Economic Perspectives and Policy
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Description:Rainfall is critical for financial viability in ranching, yet droughts are becoming more common. The USDA Pasture, Rangeland, and Forage rain-index insurance program seek to reduce drought-related financial risks. Using the DRIR-R model, we test the investment impact of rainfall-index insurance with two randomized control simulations, one with a general population and one with professional ranchers. We find no evidence of direct impacts of rainfall-index insurance on herd size or drought adaptation investments. These findings support the idea that the rain-index insurance policy limits moral hazard in a way that reduces the likelihood of overgrazing that could intensify drought stress.
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Source:Applied Economic Perspectives and Policy, 44(3), 1513-1533
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ISSN:2040-5790;2040-5804;
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Rights Information:CC BY
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Compliance:Submitted
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