Date of Award:

5-2016

Document Type:

Dissertation

Degree Name:

Doctor of Philosophy (PhD)

Department:

Applied Economics

Committee Chair(s)

Man-Keun Kim

Committee

Man-Keun Kim

Committee

DeeVon Bailey

Committee

Dillon Feuz

Committee

Arthur Caplan

Committee

Daniel Drost

Abstract

Agricultural insurance programs such as crop insurance and Dairy Margin Protection program (MPP-Dairy) are managed by United State Department of Agriculture (USDA). The objective of these programs is to help farmers manage their financial risk. Agricultural insurance programs have played an important role for farmers in terms of maintaining farm profitability. There are several potential problems with insurance programs, such as moral hazard and adverse selection, which make them inefficient.

With respect to these problems, three research gaps are identified: i) moral hazard in prevented planting (PP), ii) choice of PP and planting a second crop, and iii) selecting margin protection in the Dairy Margin Protection Program (MPP-Dairy). Theories and empirical results show that moral hazard exists in PP, meaning that a farmer who purchases a higher coverage level is likely to abandon cropping when the farmer experiences adverse events such as drought or excess moisture. Second, the farmer may not plant a second crop due to a low PP indemnity payment. Increasing the PP indemnity payment provides an incentive for the farmer to plant a second crop. Third, dairy farmers purchase more supplementary protection in MPP-Dairy when co-movement of dairy margins between US and regions is stronger.

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