Agricultural Economics Department



Charalampos Mavroutsikos

Konstantinos Giannakas

Document Type


Date of this Version



Mavroutsikos C, Giannakas K, Walters C (2021) The role of premium subsidies in crop insurance. PLoS ONE 16(4): e0250129. https://doi. org/10.1371/journal.pone.0250129


Copyright: © 2021 Mavroutsikos et al. This is an open access article distributed under the terms of the Creative Commons Attribution License


This study develops a novel framework of heterogeneous producer attitudes towards risk to analyze different, stated and revealed, roles of crop insurance premium subsidies and underlying policy objectives of the government. The analysis reveals a strong connection and a complementarity between the roles of premium subsidies in increasing producer participation in crop insurance, inducing a desired separating equilibrium in the presence of asymmetric information, and transferring income to agricultural producers participating in the program. Developing an alternative design of premium subsidies that can achieve the stated government objective of increased producer participation and induce any desired separating equilibrium at significantly reduced costs, our study rejects the idea that the income redistribution taking place under the current policy design is necessary for increasing producer participation in crop insurance. Indeed, the current policy design reveals that premium subsidies are either a means of income redistribution or a policy failure.

Included in

Agribusiness Commons