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

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

Abstract:

The twin problems of moral hazard and adverse selection are often blamed for the lack of
an active crop insurance market for fruits and vegetables. This paper develops an alternative
method of estimating the demand for insurance that uses a contingent valuation approach.
Technical inefficiency is interpreted as an indicator of a moral hazard effect. The results support
the existence of moral hazard.

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