This study examines the relationship between chemical input use and crop insurance purchase decisions for a sample of Kansas dryland wheat farmers. Recent research by Horowitz and Lichtenberg indicated that, contrary to conventional wisdom, farmers that purchased insurance tended to use relatively more chemical inputs than farmers who did not insure. In contrast, our results confirm the conventional view that moral hazard incentives lead insured farmers to use fewer chemical inputs. Implications for the joint determination of insurance and input use decisions and appropriate estimation techniques are discussed. Copyright 1996, Oxford University Press.
Agricultural insurance in developed countries originates in named peril products that were originally offered by private companies approximately two hundred years ago, first in Europe and then in the United States. Today, many agricultural insurance products are offered, most of them heavily subsidized by governments. In the context of developed economies, this article examines the evolution of agricultural insurance products, the economics of the demand and supply sides of agricultural insurance markets, and the economic welfare, political economy, and trade relation implications of private and public agricultural insurance in developed countries.
An econometric analysis of the demand for multiple peril crop insurance is carried out for a sample of 370 Montana wheat farms. The study is the first to model the farm's participation and coverage-level decisions separately through Heckman two-stage estimation procedures. These decisions are shown to be determined in different ways. In addition, farms with positive expected returns from insurance make coverage-level decisions in different ways from farms with negative expected returns. These differences indicate that adverse selection effects limit the efficacy of across-the-board premium rate increases as mechanisms for reducing loss ratios. Copyright 1996, Oxford University Press.
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