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

Yan Liang and Keith Coble

No 49485, 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin from Agricultural and Applied Economics Association

Abstract: 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.

Keywords: Agribusiness; Agricultural and Food Policy; Demand and Price Analysis; Production Economics; Risk and Uncertainty (search for similar items in EconPapers)
Pages: 19
Date: 2009
New Economics Papers: this item is included in nep-agr, nep-eff and nep-ias
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea09:49485

DOI: 10.22004/ag.econ.49485

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