A Cost Function Analysis of Crop Insurance Moral Hazard and Agricultural Chemical Use

This paper employs a cost function analysis method to investigate the existence of moral hazard in cotton buy-up insurance. The trans-log cost function estimates of the own-price elasticity of fertilizer, herbicide, and insecticide is -0.222, -0.143, and -0.121, respectively for Mississippi cotton production. Our results found statistically significant relationship between per acre direct cost and cotton buy-up insurance for year 2001 and 2005 in Mississippi. Our results also indicate that moral hazard can either decrease or increase agricultural input usage depending specific production condition in an individual year. But in general the results support effects smaller than anecdotal evidence would suggest.


Issue Date:
2009
Publication Type:
Conference Paper/ Presentation
PURL Identifier:
http://purl.umn.edu/49485
Total Pages:
19
Series Statement:
Selected Paper
612708




 Record created 2017-04-01, last modified 2017-08-25

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