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Mutual Insurance, Individual Savings And Lmited Commitment

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A primary justification for government intervention has been the failure of private agricultural insurance markets (see, for example, Appel, Lord, and Harrington, 1999; Hazell, Pomerada, and Valdez, 1986; Goodwin and Smith, 1995). In a 1922 U.S. Department of Agriculture (USDA) bulletin, Valgren describes the disastrous experiences of fire insurance companies that offered crop insurance in the Dakotas and Montana in 1917 and the early 1920s. Severe droughts caused widespread crop losses in those states. The insurance companies had not protected themselves from such large losses and were unable to indemnify the insured farmers. As Valgren concluded, “the outcome of this first attempt to provide a general crop coverage is much to be regretted.” ...
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Mutual Insurance, Individual Savings And Lmited Commitment

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