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Price Insurance, Moral Hazard and Agri-environmental Policy

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  • Fraser, Rob W.

Abstract

Motivated by recent EC proposals to “strengthen risk management tools” in the CAP in relation to farmers’ increased exposure to market price risk, this paper draws attention to a potential negative consequence of such a change in the CAP – an associated increase in cheating behaviour by farmers in the context of environmental stewardship. A theoretical framework for this policy problem is developed and used not just to illustrate the problem, but also to propose a solution – specifically to combine the introduction of CAP-supported policy changes which reduce farmers’ exposure to market-based risk with changes in environmental stewardship policies which increase the riskiness of cheating and thereby discourage such behaviour.

Suggested Citation

  • Fraser, Rob W., 2012. "Price Insurance, Moral Hazard and Agri-environmental Policy," 2012 Conference (56th), February 7-10, 2012, Fremantle, Australia 124305, Australian Agricultural and Resource Economics Society.
    • Handle: RePEc:ags:aare12:124305
    DOI: 10.22004/ag.econ.124305
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    References listed on IDEAS

    as
    1. Rob Fraser, 2002. "Moral Hazard and Risk Management in Agri‐environmental Policy," Journal of Agricultural Economics, Wiley Blackwell, vol. 53(3), pages 475-487, November.
    2. P. B. R. Hazell & M. Jaramillo & A. Williamson, 1990. "The Relationship Between World Price Instability And The Prices Farmers Receive In Developing Countries," Journal of Agricultural Economics, Wiley Blackwell, vol. 41(2), pages 227-241, May.
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    Keywords

    Demand and Price Analysis; Environmental Economics and Policy; Risk and Uncertainty;
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