Findings from North Carolina State University (NC State) Provides New Data about Crop Insurance (Input Use Under Cost-of-production Crop Insurance: Theory and Evidence)

2020 APR 16 (NewsRx) -- By a News Reporter-Staff News Editor at Insurance Daily News -- New research on Agriculture - Crop Insurance is the subject of a report. According to news reporting out of Raleigh, North Carolina, by NewsRx editors, research stated, “There have been a number of previous studies that examined the effects of yield- or revenue-based crop insurance products on input use of farmers. However, no study has specifically investigated the input use impacts of a cost-of-production (COP) crop insurance policy, even though this type of crop insurance is the predominant one used in several other countries outside of the United States (such as the Philippines and China).”

Funders for this research include National Science Foundation of China, Fundamental Research Funds for the Central Universities in China, USDepartment of Agriculture Hatch Projects.

Our news journalists obtained a quote from the research from North Carolina State University (NC State), “This article aims to theoretically and empirically examine the effect of a COP crop insurance product on farmers’ chemical input use. Our theoretical model suggests that the effect of COP insurance on input use can either be positive or negative, with the resulting impact depending on the strengths of (a) the traditional moral hazard effect of insurance (i.e., an input use decreasing effect); versus (b) the marginal incentives to apply more inputs due to input levels being the main determinant for expected indemnity amounts in this type of insurance (i.e., an input use increasing effect). A survey data set from corn farmers in the Philippines is then used to empirically illustrate how a particular COP insurance product influences input use in a real-life context.”

According to the news editors, the research concluded: “In this case, we find that COP insurance increases the use of chemical inputs (e.g., fertilizers and total chemical expenditure), implying that the positive marginal incentive to apply more inputs dominates the negative moral hazard effect.”

For more information on this research see: Input Use Under Cost-of-production Crop Insurance: Theory and Evidence. Agricultural Economics, 2020;():. Agricultural Economics can be contacted at: Wiley, 111 River St, Hoboken 07030-5774, NJ, USA. (Wiley-Blackwell - http://www.wiley.com/; Agricultural Economics - http://onlinelibrary.wiley.com/journal/10.1111/(ISSN)1574-0862)

Our news journalists report that additional information may be obtained by contacting X.Y. Zheng, North Carolina State University (NC State), Dept. of Agricultural and Resource Economics, Raleigh, NC 27695, United States. Additional authors for this research include J. He, R. Rejesus and J. Yorobe.

The direct object identifier (DOI) for that additional information is: https://doi.org/10.1111/agec.12558. This DOI is a link to an online electronic document that is either free or for purchase, and can be your direct source for a journal article and its citation.

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