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Determinants of Anomalous Prevented Planting Claims: Theory and Evidence from Crop Insurance

Author

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  • Rejesus, Roderick M.
  • Lovell, Ashley C.
  • Little, Bertis B.
  • Cross, Mike H.

Abstract

This study examines the factors that determine the likelihood of submitting a potentially fraudulent prevented planting claim. A theoretical model is developed and the theoretical predictions are empirically verified by utilizing a binary choice model and crop insurance data from the southern United States. The empirical results show that insured producers with higher prevented planting coverage, lower dollar value of expected yield, and a history of submitting prevented planting claims are more likely to submit an anomalous prevented planting claim. The empirical model also suggests revenue insurance plans may be more vulnerable to prevented planting fraud than the traditional yield-based insurance plan. Results of this study can be valuable to compliance offices in their efforts to find "indicators" of fraudulent behavior in crop insurance, especially with regard to prevented planting.

Suggested Citation

  • Rejesus, Roderick M. & Lovell, Ashley C. & Little, Bertis B. & Cross, Mike H., 2003. "Determinants of Anomalous Prevented Planting Claims: Theory and Evidence from Crop Insurance," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 32(2), pages 1-15, October.
    • Handle: RePEc:ags:arerjl:31632
    DOI: 10.22004/ag.econ.31632
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    References listed on IDEAS

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    1. John C. Quiggin & Giannis Karagiannis & J. Stanton, 1993. "Crop Insurance And Crop Production: An Empirical Study Of Moral Hazard And Adverse Selection," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 37(2), pages 95-113, August.
    2. Picard, Pierre, 1996. "Auditing claims in the insurance market with fraud: The credibility issue," Journal of Public Economics, Elsevier, vol. 63(1), pages 27-56, December.
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    4. Charles E. Hyde & James A. Vercammen, 1997. "Costly Yield Verification, Moral Hazard, And Crop Insurance Contract Form," Journal of Agricultural Economics, Wiley Blackwell, vol. 48(1‐3), pages 393-407, January.
    5. Keith H. Coble & Thomas O. Knight & Rulon D. Pope & Jeffery R. Williams, 1997. "An Expected-Indemnity Approach to the Measurement of Moral Hazard in Crop Insurance," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(1), pages 216-226.
    6. John K. Horowitz & Erik Lichtenberg, 1993. "Insurance, Moral Hazard, and Chemical Use in Agriculture," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 75(4), pages 926-935.
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    Cited by:

    1. repec:ags:aaea22:335430 is not listed on IDEAS
    2. Yuehua Zhang & Ying Cao & H. Holly Wang, 2018. "Cheating? The Case of Producers’ Under‐Reporting Behavior in Hog Insurance in China," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 66(3), pages 489-510, September.
    3. Tian, Guang & Conley, Shawn & Naeve, Seth & Mitchell, Paul, 2025. "Spring Precipitation, Delayed Planting, and Farmer Adaptation in Midwestern Soybean Production," 2025 AAEA & WAEA Joint Annual Meeting, July 27-29, 2025, Denver, CO 361173, Agricultural and Applied Economics Association.
    4. Lee, Seungki & Won, Sunjae & Yu, Jisang, 2025. "Decomposing Moral Hazard in Prevented Planting," 2025 AAEA & WAEA Joint Annual Meeting, July 27-29, 2025, Denver, CO 361185, Agricultural and Applied Economics Association.
    5. Gallagher, Nicholas James, 2024. "Dynamic Programming Methods for Characterizing In-Season Farm Management Decisions," Dissertations and Theses 344827, Ekiti State University, Ado-Ekiti, Department of Agricultural Economics and Extension Services.
    6. Tian, Guang & Conley, Shawn & Naeve, Seth & Mitchell, Paul, 2025. "Spring Precipitation, Delayed Planting, and Farmer Adaptation in Midwestern Soybean Production," 2025 AAEA & WAEA Joint Annual Meeting, July 27-29, 2025, Denver, CO 361062, Agricultural and Applied Economics Association.
    7. Sunjae Won & Roderick M. Rejesus & Barry K. Goodwin & Serkan Aglasan, 2024. "Understanding the effect of cover crop use on prevented planting losses," American Journal of Agricultural Economics, John Wiley & Sons, vol. 106(2), pages 659-683, March.
    8. 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.
    9. Christopher N. Boyer & Eunchun Park & Seong D. Yun, 2023. "Corn and soybean prevented planting acres response to weather," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 45(2), pages 970-983, June.
    10. Yufei Jin & Roderick Rejesus & Bertis Little, 2005. "Binary choice models for rare events data: a crop insurance fraud application," Applied Economics, Taylor & Francis Journals, vol. 37(7), pages 841-848.
    11. Taehoo Kim & Man‐Keun Kim, 2018. "Ex‐post moral hazard in prevented planting," Agricultural Economics, International Association of Agricultural Economists, vol. 49(6), pages 671-680, November.

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