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Experimental identification of asymmetric information: Evidence on crop insurance in the Philippines

Snaebjorn Gunnsteinsson

Journal of Development Economics, 2020, vol. 144, issue C

Abstract: I study asymmetric information in crop insurance in the Philippines using a two-level randomized field experiment and incentivized preference elicitation. In this first experimental study of moral hazard in non-health insurance, preventable damages double on randomly insured plots among farmers with high trust in the insurance provider. Farmers prefer insurance on plots that are at risk of floods and crop diseases, a sign of classic adverse selection, and plots that are far away from home, a sign of selection on anticipated moral hazard behavior, resulting in 72% higher payouts on preferred plots. Overcoming these challenges requires leveraging new technologies.

Keywords: Insurance; Adverse selection; Moral hazard; Selection on moral hazard; Information asymmetries; Selective trials; Crop insurance; Experiment; Philippines; Agriculture (search for similar items in EconPapers)
JEL-codes: C9 D82 G22 O1 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1016/j.jdeveco.2019.102414

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Handle: RePEc:eee:deveco:v:144:y:2020:i:c:s0304387818313452