ASYMMETRIC INFORMATION IN COTTON INSURANCE MARKETS: EVIDENCE FROM TEXAS

Shiva S. Makki and Agapi Somwaru

No 19827, 2002 Annual meeting, July 28-31, Long Beach, CA from American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association)

Abstract: In recent years, the crop insurance program has emerged as an important part of the U.S. farm policy. Farmers responded to the crop insurance program with increased participation nationwide. At issue is whether the rapid expansion of the program has worsened the asymmetric information problems in crop insurance markets. This paper investigates the presence of adverse selection in cotton insurance markets. Our results reject the conditional independence of the choice of insurance contracts and risk of loss, implying the presence of informational asymmetries between the insurer and insured in Texas cotton insurance markets. Results show that actual premium rates are significantly different from both pure and fair premium rates.

Keywords: Risk; and; Uncertainty (search for similar items in EconPapers)
Pages: 27
Date: 2002
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea02:19827

DOI: 10.22004/ag.econ.19827

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