Estimating the Effect of Crop Insurance on Input Use When Insured Farmers are Monitored

Juan He, Xiaoyong Zheng (), Roderick Rejesus and Jose Yorobe

No 235225, 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts from Agricultural and Applied Economics Association

Abstract: Monitoring is one way to alleviate the moral hazard problem rampant in most crop insurance programs. Lacking explicit data on monitoring, we test the effectiveness of monitoring on reducing moral hazard behavior indirectly. We first propose a theoretical model that takes into account several features of the Philippines crop insurance program – the empirical setting of interest. Our model predicts that if monitoring is effective, then crop insurance should have a positive effect on the use of certain inputs. Our empirical analysis of a survey dataset of corn farmers in the Philippines confirms this theoretical prediction and lends empirical support to the hypothesis that monitoring is effective in reducing moral hazard behavior by the farmers.

Keywords: Crop Production/Industries; Food Security and Poverty; Industrial Organization; Risk and Uncertainty (search for similar items in EconPapers)
Pages: 46
Date: 2016-05-14
New Economics Papers: this item is included in nep-ias
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea16:235225

DOI: 10.22004/ag.econ.235225

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