IDEAS home Printed from https://ideas.repec.org/a/bla/agecon/v50y2019i3p367-375.html
   My bibliography  Save this article

Moral hazard: the effect of insurance on risk and efficiency

Author

Listed:
  • Kristin H. Roll

Abstract

While there is a large body of literature investigating the effect of crop and livestock insurance on input and yield, limited attention has been paid to the effect of insurance on efficiency. This article investigates how insurance affects technical efficiency and whether insurance alters the utilized input quantity to a riskier bundle using the Norwegian salmon farming industry as a case. The results illustrate that insurance has an enhancing effect on production and efficiency and changes the utilized input mix—a well‐insured farmer uses more feed and less capital and labor than a less‐insured farmer. When linking this to each input's risk profile, the results indicate that insurance will induce the use of the risk‐increasing factor (feed) and reduce the use of the risk‐decreasing factors (labor and capital)—thereby increasing production risk and indicating moral hazard.

Suggested Citation

  • Kristin H. Roll, 2019. "Moral hazard: the effect of insurance on risk and efficiency," Agricultural Economics, International Association of Agricultural Economists, vol. 50(3), pages 367-375, May.
    • Handle: RePEc:bla:agecon:v:50:y:2019:i:3:p:367-375
    DOI: 10.1111/agec.12490
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/agec.12490
    Download Restriction: no
    File URL: https://libkey.io/10.1111/agec.12490?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. S. C. West & A. W. Mugera & R. S. Kingwell, 2022. "The choice of efficiency benchmarking metric in evaluating firm productivity and viability," Journal of Productivity Analysis, Springer, vol. 57(2), pages 193-211, April.
    2. Hui Mao & Shaojian Chen & RuiYao Ying & Yong Fu, 2023. "How crop insurance influences agrochemical input use: Evidence from cotton farmers in China," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 67(2), pages 224-244, April.
    3. Kamel Louhichi & Daël Merisier, 2024. "Potential impacts of the Common Agricultural Policy's Income Stabilisation Tool on farmers' incomes and crop diversity: A French case study," Journal of Agricultural Economics, Wiley Blackwell, vol. 75(2), pages 716-739, June.
    4. Jianru Fu & Ruiyuan Shen & Chao Huang, 2023. "How does price insurance alleviate the fluctuation of agricultural product market? A dynamic analysis based on cobweb model," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 69(5), pages 202-211.
    5. Juan He & Xiaoyong Zheng & Roderick Rejesus & Jose Yorobe, 2020. "Input use under cost‐of‐production crop insurance: Theory and evidence," Agricultural Economics, International Association of Agricultural Economists, vol. 51(3), pages 343-357, May.
    6. Tao Li & Lihong Chen & Xiaoxu Li & Sha Li & Haibing Chen & Hao Ji, 2021. "The Impact of Cost-of-Production Insurance on Input Expense of Fruit Growing in Ecologically Vulnerable Areas: Evidence from Shaanxi Province of China," Sustainability, MDPI, vol. 13(21), pages 1-14, November.
    7. Shenan Wu & Barry K. Goodwin & Keith Coble, 2020. "Moral hazard and subsidized crop insurance," Agricultural Economics, International Association of Agricultural Economists, vol. 51(1), pages 131-142, January.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:agecon:v:50:y:2019:i:3:p:367-375. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/iaaeeea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.