Abstract:We investigate the nature of crop yield systemic risk and its implications for farmers' area yield insurance choices. A theory-grounded, normalized measure of systemic risk, R 2 , is developed and made amenable to empirical analysis through the logit link. The measure is estimated on a large-scale, unit-level corn yield dataset. We find that systemic risk explains less than half of total unit yield variability on average, suggesting that the risk management effectiveness of area yield insurance is low. By rela… Show more
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