Applicability Of The Normalized Difference Vegetation Index In Index-Based Crop Insurance Design

AbstractIndex insurance is becoming increasingly popular because of its ability to provide low-cost, relatively easy to implement agricultural insurance for vegetation types whose productivity has been notoriously difficult to measure and to farmers in less-developed nations where traditional crop insurance schemes are not reasonable to implement. This study examines if the remotely sensed normalized difference vegetation index (NDVI) can be an effective basis for index-based crop insurance over a diverse set of locations. To do this the authors compare Advanced Very High Resolution Radiometer (AVHRR) values to cumulative precipitation, extreme heat, and crop yields for 60 locations across the United States for the years 1982–2003. Quadratic regression equations are used to explore these relationships. The findings suggest that the relationship between NDVI, precipitation, extreme heat, and crop yields is highly variable and dependent on location-specific characteristics. Without site-specific calibration...