The SURE Program: An Investigation of Moral Hazard Opportunities and Adverse Selection Effects

Anton Bekkerman, Vincent H. Smith and Myles J. Watts

No 124178, 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington from Agricultural and Applied Economics Association

Abstract: The Supplemental Revenue Assistance Payments (SURE) program, introduced in the 2008 Farm Bill, provides disaster aid payments to producers in counties eligible for disaster payments and individual producers with crop production losses that exceed 50% of their expected yields. We show that the program’s "rules of the game" create moral hazard and adverse selection incentives. Then, we empirically analyze possible moral hazard and adverse selection behavior in response to the SURE program by corn, soybean, and wheat producers. Results suggest that recent increases in crop insurance participation may be due to increased moral hazard and adverse selection incentives.

Keywords: Risk; and; Uncertainty (search for similar items in EconPapers)
Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea12:124178

DOI: 10.22004/ag.econ.124178

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