African Journal of
Agricultural Research

  • Abbreviation: Afr. J. Agric. Res.
  • Language: English
  • ISSN: 1991-637X
  • DOI: 10.5897/AJAR
  • Start Year: 2006
  • Published Articles: 6638

Full Length Research Paper

Estimating the threshold value and loss distribution: Rice damaged by typhoons in Taiwan

Li-Hua Lai1* and Pei-Hsuan Wu2
1Department and Graduate Institute of Risk Management and Insurance, National Kaohsiung First University of Science and Technology, Taiwan. 2Institute of Management, National Kaohsiung First University of Science and Technology, Taiwan. Department of Public Finance, Meiho Institute of Technology, Taiwan.
Email: [email protected]

  •  Accepted: 24 November 2008
  •  Published: 31 December 2008

Abstract

We apply extreme value theory to determine the over-threshold peaks of the data and then use the Kolmogorv-Smirnov and Anderson-Darling goodness of fit tests to show that the generalized Pareto distribution fits the heavy-tailed distribution better than the Lognormal, Gamma, Weibull and Normal distributions in rice damaged by typhoons. The appropriate of the threshold value and probable maximum loss can be calculated as one of reference indexes on risk retention or/and crop insurance associated with the natural systematic risk of major agricultural disasters. The properties we found are useful in crop loss assessment and in the decision making of government's risk financing for major agricultural disasters. Our method may be applied to other disasters and other countries.

 

Key wordsNatural disasters, generalized Pareto distribution, heavy-tailed distribution, threshold value, probable maximum loss.