Heterogeneity and Distributional Form of Farm‐Level Yields

Representing farm‐level crop yield heterogeneity and distributional form is critical for risk and crop insurance research. Most studies have used county data, understating both systematic and random variation. Comparison of systematic versus random intra‐county variation is lacking. Few studies compare the various distributional forms that have been proposed. This study utilizes the extensive potential of government farm‐level crop insurance data. Results show that systematic intra‐county variation is surprisingly strong. A newly applied reverse lognormal distribution is preferred when county‐wide variation is removed, but the normal distribution fits surprisingly well in the crop insurance relevant percentiles when county‐wide variation is not removed.