Xuche Gong, a PhD student in the Department of Economics, and CARD researchers David Hennessy and Hongli Feng won the Best Paper Award presented by the Applied Risk Analysis Section of the Agricultural and Applied Economics Association (AAEA). The authors were awarded at the 2024 AAEA Annual Meeting that took place July 27-30 in New Orleans.

Gong, Hennessy, and Feng won the award for their article "Systemic risk, relative subsidy rates, and area yield insurance choice," which originally appeared in the May 2023 issue of American Journal of Agricultural Economics.

In the article, the authors investigate the nature of crop yield systemic risk and its implications for farmers' area yield insurance choices and find that it explains less than half of total unit yield variability on average, suggesting that the risk management effectiveness of area yield insurance is low. Furthering the study, the authors relate natural resource endowments with systemic risk and find that more excessive heat and drought events lead to larger systemic risk while more excessive precipitation events lead to smaller systemic risk. Lastly, using a new concept, they study whether current area yield insurance subsidy rates provide farmers with sufficient subsidy transfers to compensate for the uncovered risk exposure associated with area yield insurance. Their findings indicate that current area yield insurance subsidy rates discourage farmers from choosing area yield insurance over individual yield insurance, especially at low area yield insurance coverage levels.