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  • P-ISSN 1738-656X
  • E-ISSN 2586-4130
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한국개발연구. Vol. 36, No. 4, November 2014, pp. 135-170

https://doi.org/10.23895/kdijep.2014.36.4.135

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An Empirical Analysis on the Production and Price Effect by Agricultural Disaster Insurance

Sung min Han

Author & Article History

Manuscript received 13 March 2014; revision received 24 March 2014; accepted 13 August 2014.

Abstract

This study empirically analyzes changes in production patterns of farmers by agricultural disaster insurance. The aim of this project is to achieve stability of farm management by paying insurance in case of a natural disaster. However, it causes farmers to change production patterns in the direction of increasing production, and leads the crop price to drop. This can be explained by producers’ risk reduction through the disaster insurance. The empirical analysis is based on Ⅳ approach with using two stage least squares method. The first stage estimates by difference-in-differences methodology indicate that the production of insurable crops increases more about 80,000ton on average than that of non-insurable crops. In addition, to solve the endogeneity problem caused by general supply and demand model, I use the first stage estimates and find that the price index of the crops drops about 2.3% according to the production increase by 10,000ton. The credibility of these results is also attained by various robustness checks. These findings suggest that it is necessary for government to analyze the whole economy which consists of producer and consumer welfare when it determines the policy. Besides, it implies that it is essential to develop a new market to cope with the unintended effect.

Keywords

농업재해보험(Agricultural Disaster Insurance), 생산량효과(Production Effect), 가격효과(Price Effect)

JEL Code

Q11, Q18, C26, H84

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