 Input Use Decisions with Greater Information on Crop Conditions: Implications for Insurance Moral Hazard and the EnvironmentJisang Yu and Nathan Hendricks American Journal of Agricultural Economics, 2020, vol. 102, issue 3, 826-845 Abstract: Emerging precision agriculture technologies allow farms to make input decisions with greater information on crop conditions. This greater information occurs by providing improved predictions of crop yields using remote sensing and crop simulation models and by allowing farms to apply inputs within the growing season when some crop conditions are already realized. We use a stylized model with uncertainty in yield and price to examine how greater information on crop conditions (i.e., a “forecast”) affects input use for insured and uninsured farms. We show that moral hazard decreases—farms apply more inputs—as the forecast accuracy improves when the forecast indicates good yields, and vice versa when the forecast indicates bad yields. In the long run, moral hazard decreases in response to an improvement in forecast accuracy. Even though moral hazard decreases in the long run, indemnity payments are likely to increase in the long run—driven by the increase in moral hazard when the forecast indicates bad crop conditions. We use the results of our model to discuss the potential impact of different technologies and types of inputs on the federal crop insurance program and the environment. Date: 2020 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:wly:ajagec:v:102:y:2020:i:3:p:826-845 Access Statistics for this article More articles in American Journal of Agricultural Economics from John Wiley & Sons |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.