OPTIONAL UNIT POLICY IN CROP INSURANCE

Saleem Shaik and Joseph A. Atwood

No 19741, 2002 Annual meeting, July 28-31, Long Beach, CA from American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association)

Abstract: Utilizing ordered logit we examine the presence of two kinds of asymmetric information-adverse selection (intertemporal variability) and moral hazard (interspatial and/or residual variability) as revealed by the choice of optional units in Federal crop insurance utilizing Risk Management Agency's 1996-2000 cotton yield and loss data files. Further, a tobit model is estimated to examine the factors explaining the loss cost ratio from Risk Management Agency perspective. Potential costs of adverse selection and/or moral hazard in optional unit provision are estimated to be as high as $180 million in US cotton over the 1996-2000 period.

Keywords: Adverse Selection; Moral Hazard; Optional Unit Policy; Crop Insurance; U.S. Cotton; Logit and Tobit models.; Risk; and; Uncertainty (search for similar items in EconPapers)
Pages: 25
Date: 2002
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea02:19741

DOI: 10.22004/ag.econ.19741

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