Evaluating Changes to Prevented Planting Provision on Moral Hazard. (2nd April 2019)

• Record Type: Journal Article
• Authors: Boyer, Christopher N.; Aaron Smith, S.
• Is Part Of: Journal of agricultural and applied economics. Volume 51:Number 2(2019)
• Page Start: 315
• Page End: 327
• Publication Date: 2019-04-02
• Subjects: Crop insurance, -- moral hazard, -- prevented planting, -- yield response function; Q12, -- Q18; Agriculture -- economics; Agriculture -- Economic aspects -- Periodicals; Agriculture -- Economic aspects -- Southern States -- Periodicals; Agriculture -- Economic aspects -- United States -- Periodicals; Agriculture -- Aspect économique -- Périodiques; Agriculture -- Aspect économique -- États-Unis -- Périodiques; Agrarökonomik; Agrarmarkt; USA; Welt; Agriculture -- Economic aspects; United States; Periodicals; 338.10975
• DOI: 10.1017/aae.2019.2
• Languages: English
• ISSNs: 1074-0708

Abstract

Abstract: Prevented planting provision in crop insurance protects producers from failure to plant attributable to natural causes. We determined the impact of this provision at various crop insurance coverage levels on prevented planting claims and ex post moral hazard. The moral hazard incentive in the prevented planting provision is stronger for corn than soybeans. Reducing the prevented planting coverage factor for corn could likely reduce moral hazard, but the degree of the reduction will likely depend on the revenue protection coverage level. Conversely, we found moral hazard is unlikely to occur for soybean production regardless of the revenue protection coverage level.