ASYMMETRIC INFORMATION IN COTTON INSURANCE MARKETS: EVIDENCE FROM TEXAS

In recent years, the crop insurance program has emerged as an important part of the U.S. farm policy. Farmers responded to the crop insurance program with increased participation nationwide. At issue is whether the rapid expansion of the program has worsened the asymmetric information problems in crop insurance markets. This paper investigates the presence of adverse selection in cotton insurance markets. Our results reject the conditional independence of the choice of insurance contracts and risk of loss, implying the presence of informational asymmetries between the insurer and insured in Texas cotton insurance markets. Results show that actual premium rates are significantly different from both pure and fair premium rates.


Issue Date:
2002
Publication Type:
Conference Paper/ Presentation
PURL Identifier:
http://purl.umn.edu/19827
Total Pages:
27
Series Statement:
Selected Paper




 Record created 2017-04-01, last modified 2017-08-24

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