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An Expected‐Indemnity Approach to the Measurement of Moral Hazard in Crop Insurance
Author(s) -
Coble Keith H.,
Knight Thomas O.,
Pope Rulon D.,
Williams Jeffery R.
Publication year - 1997
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.2307/1243955
Subject(s) - indemnity , moral hazard , crop insurance , morale hazard , actuarial science , production (economics) , hazard , economics , panel data , business , casualty insurance , insurance policy , agricultural science , agriculture , auto insurance risk selection , environmental science , econometrics , microeconomics , geography , incentive , chemistry , archaeology , organic chemistry
A definition of moral hazard in multiple peril crop insurance is proposed that focuses on expected indemnities rather than input use. Five years of production and insurance data for a panel of Kansas wheat farms is used to empirically test for this type of moral hazard. Results suggest that moral hazard affects multiple peril crop insurance indemnities in poor production years but that no significant moral hazard occurs in years when growing conditions are favorable.