Drought index insurance for the Central Valley Project in California

Teresa Maestro, Barry J. Barnett, Keith H. Coble, Alberto Garrido, María Bielza

Research output: Contribution to journalArticlepeer-review

19 Scopus citations

Abstract

A multi-year drought has taken a severe toll on the agricultural economy of California's Central Valley. Index insurance is an instrument with the potential to protect water users from economic losses due to periodic water shortages. An index insurance product based on the Sacramento Index and adapted to the Central Valley Project water supply is proposed. To address the potential for intertemporal adverse selection, three product designs are suggested: (1) "early bird" insurance; (2) variable premium insurance; and (3) variable deductible insurance. The performance of the designs are assessed using loss functions from the Westlands Water District in the San Joaquin Valley.

Original languageEnglish
Pages (from-to)521-545
Number of pages25
JournalApplied Economic Perspectives and Policy
Volume38
Issue number3
DOIs
StatePublished - Sep 1 2016

Bibliographical note

Publisher Copyright:
© The Author 2016.

Keywords

  • Intertemporal adverse selection
  • Irrigated agriculture
  • Sacramento Index
  • Water supply

ASJC Scopus subject areas

  • Development
  • Economics and Econometrics

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