Paulson, Nicholas D.

By: Paulson, Nicholas D.; Babcock, Bruce A.
The production literature has shown that inputs such as fertilizer can be defined as risk-increasing. However, farmers also consistently overapply nitrogen. A model of optimal input use under uncertainty is used to address this paradox. Using experimental data, a stochastic production relationship between yield and soil nitrate is estimated. Numerical results show that input uncertainty may cause farmers to overapply nitrogen. Survey data suggest that farmers are risk averse, but prefer small chances of high yields compared to small chances of crop failures when expected yields are equivalent. Furthermore, yield risk and yield variability are not equivalent.
By: Paulson, Nicholas D.; Babcock, Bruce A.
The successful expansion of the U.S crop insurance program has not eliminated ad hoc disaster assistance. An alternative currently being explored by Congress in preparation of the 2008 farm bill is a standing disaster relief program. One form such a program could take can be found in the area insurance programs currently offered by the U.S crop insurance program. Total per acre taxpayer costs of offering Group Risk Income Protection (GRIP) in Indiana, Illinois, and Iowa for corn and soybeans are estimated to have the ability to fund a country target revenue program at the 93% coverage level.