The Demand for Specialty-Crop Insurance: Adverse Selection and Moral Hazard



socioeconomic factors as the level of off-farm income, the capital structure of the farm, the
producer's age, her level of education, cooperative membership, the level of crop and geographic
diversification of the farm, or the use of irrigation. Goodwin provides a discussion of how each of
these factors is expected to influence the demand for insurance. Parameter estimates that show a
higher willingness-to-pay for the more inefficient producers suggests moral hazard may present a
problem for fruit and vegetable insurance, while a positive effect of historical yield variability may
indicate the presence of adverse selection in the sense of QKS.4 Including yield variation in the
set of explanatory variables captures growers’ dual objective of achieving maximum return
conditional on a level of returns variability. Measures of yield risk and the subjective value of
insurance are described in the following section.

Data and Methods

A nationwide survey of fruit and vegetable growers provides the data for this study. Specifically,
a cluster-sample was defined for each of 32 commodities, both insurable and non-insurable, with a
target response of at least twenty growers per commodity. The number of growers per state was
selected on a grower-number basis, and not by production value. With a focus on explaining
likely aggregate participation rates, sampling by population rather than value of production
provides a better indication of the likely distribution of insurance buyers. The sub-sample selected
for this study include potato, apple, grape, onion, and watermelon growers. Of the total 132
responses, 67 provided useable input and yield data. The survey was mailed in December, 1995
and the responses used in this study collected by April 30, 1996. Data pertain to the 1995 crop

4 Where FCIC insurance is not available, some producers still are able to purchase private insurance.
Participation in the recently introduced NAP also indicates a proclivity to insure.



More intriguing information

1. Short Term Memory May Be the Depletion of the Readily Releasable Pool of Presynaptic Neurotransmitter Vesicles
2. A Note on Productivity Change in European Co-operative Banks: The Luenberger Indicator Approach
3. The name is absent
4. Foreword: Special Issue on Invasive Species
5. Categorial Grammar and Discourse
6. The name is absent
7. Determinants of U.S. Textile and Apparel Import Trade
8. The name is absent
9. The name is absent
10. Text of a letter
11. Non-farm businesses local economic integration level: the case of six Portuguese small and medium-sized Markettowns• - a sector approach
12. Macro-regional evaluation of the Structural Funds using the HERMIN modelling framework
13. Word Sense Disambiguation by Web Mining for Word Co-occurrence Probabilities
14. Thresholds for Employment and Unemployment - a Spatial Analysis of German Regional Labour Markets 1992-2000
15. The name is absent
16. The name is absent
17. The name is absent
18. CAN CREDIT DEFAULT SWAPS PREDICT FINANCIAL CRISES? EMPIRICAL STUDY ON EMERGING MARKETS
19. Smith and Rawls Share a Room
20. THE INTERNATIONAL OUTLOOK FOR U.S. TOBACCO