Empirical results from a survey of US fruit and vegetable growers support the
hypothesized effect for three levels of cost of production crop insurance coverage. Growers who
are more efficient, have higher debt to assets ratios, have participated in crop programs in the
past, and who use irrigation all place a lower value on crop insurance. On the other hand, older
growers, growers who contract their output, or those who are less concerned about yield risk are
willing to pay more for insurance. Taken together, these results suggest that the potential for
adverse selection and moral hazard to arise in fruit and vegetable insurance is significant and can
explain why such insurance is not widely used today.
12
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