Korea Agricultural Economics Association

Title Analysis of Income Stabilization Effect and Fiscal Efficiency of Korean Crop Revenue Insurance
Author Soojin Kim, Yugang Sim, Sangtaek Seo
Paper Information Vol.62 No.2 (2021-6) Page 135~153
File KJAE(2021-Vol62No02)-Korean-07.pdf
Abstract We analyzed the income stabilization effect of Korean revenue insurance with empirical data during the demonstration period from 2015 to 2018. In addition, profitability of the revenue insurance opposed to no insurance and fiscal efficiency of the revenue insurance opposed to yield insurance were analyzed. We adopted coefficient of variation and certainty equivalent methods to analyze the income stabilization effect, where certainty equivalent was measured under the assumption of power utility function with risk averse farmers. Seven crops included for the study were onion, bean, grape, garlic, autumn potato, sweet potato, and cabbage. Results showed that the revenue insurance had higher income stabilization effect compared with no insurance and yield insurance. Certainty equivalent during the analytical period amounted to 228 billion won with the revenue insurance while 162 billion won with no insurance, making additional 66 billion won in the revenue insurance. The revenue insurance produced net benefit of 22 billion won during the analytical period, which revealed economic feasibility. However, the revenue insurance showed a half of fiscal efficiency compared with yield insurance.