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Decomposing Moral Hazard in Prevented Planting

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  • Lee, Seungki
  • Won, Sunjae
  • Yu, Jisang

Abstract

Prevented planting (PP) provision of the US Federal Crop Insurance Program (FCIP) indemnifies when the adverse weather or field condition prevents the insured from planting. We explore empirical relationships between weather and PP using two different datasets, observational and experimental, to assess whether moral hazard behavior exists in PP provision in the US FCIP. Overall, we find that observed PP is more sensitive to weather than PP occurrence in experimental data. Our finding implies that producers with crop insurance and PP provision tend to react more responsively to adverse weather than they would otherwise, indicating a form of moral hazard behavior.

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  • 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.
    • Handle: RePEc:ags:aaea25:361185
    DOI: 10.22004/ag.econ.361185
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