Cornell and Purdue use @RISK to Assess US Agriculture Policy
The US Government spent $24 billion on farm programs in 2000. The benefits were distributed through a variety of income-enhancing and risk-reducing policies. For instance, some programs provided price protection, others a direct subsidy, and others subsidized the purchase of crop insurance.
How do these programs individually and collectively reduce agricultural risk? Are these programs having the desired effects? Is the money helping producers reduce risk and thereby providing a disincentive to purchase crop insurance? And are there better ways to address agricultural risk?
Researchers at Cornell University and Purdue University recently completed a study that assesses the impacts of US farm programs on farm returns and answers some of the above questions. The researchers used Palisade’s @RISK to create a simulation model that illustrates the effects of government policy tools on farm incomes.
The @RISK Simulation Model
Assistant Professor Brent Gloy of Cornell University’s Applied Economics and Management Department was one of the researchers. “@RISK was vital to the simulation model. It allowed us to incorporate uncertainties and run random simulations on the various scenarios.” He adds, “@RISK’s ability to correlate distributions of random variables was essential to the model. Additionally, we used @RISK’s output statistics to compare the various model scenarios.”
The study was recently published in the Review of Agricultural Economics. For more information about the study, contact Brent Gloy at 607-255-9822 or firstname.lastname@example.org.