Crop Insurance and Crop Production : An Empirical Study of Moral Hazard and Adverse Selection
نویسندگان
چکیده
anonymous referee for helpful comments and criticism.
منابع مشابه
Identifying Information Asymmetries in Insurance: Experimental Evidence on Crop Insurance from the Philippines
Why have insurance markets for many important risks failed to develop? Economic theory suggests this is most likely due to asymmetric information problems, but their presence is hard to identify empirically. In this paper I provide empirical estimates of information asymmetries in the insurance for crops, a market that has failed to develop for the most important types of natural hazards to cro...
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ABSTRACT-The agricultural sector encompasses activities that are exposed to diverse risks. Risks in the agricultural sector are unavoidable but manageable. Crop insurance is a management tool in the agricultural sector. Crop insurance is a strategy to cope with the production risks of the agricultural sector and to secure farmers’ income in the future. Mango is a major horticul...
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The main motivation for this paper is the recognition of the fact that asymmetric information in the form of moral hazard and adverse selection results in sizeable efficiency losses. These costs are passed back to producers in the form of excessively high premium rates and also passed back to the government via the crop insurance subsidy program. A secondary motivation stems from a recent debat...
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Monitoring is one way to alleviate the moral hazard problem rampant in crop insurance programs. Lacking 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. Our model predicts that if monitoring is effective, then crop insu...
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Asymmetric information imposes costs on a wide range of markets and may explain why some important markets, such as most agricultural insurance markets, have failed to develop. It is hard to empirically identify the different dimensions of asymmetric information but doing so is crucial for improving efficiency and solving market failures. I develop a new experimental methodology and apply it to...
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