SABIIA - Sistema Aberto e Integrado de Informação em Agricultura (Sabiia)

Liesivaara, Petri; Myyra, Sami; Jaakkola, Antti.

Whole-farm income insurances are promoted in the new post-2013 Common Agricultural Policy (CAP). The current Crop Damage Compensation (CDC) scheme in Finland covers crop failure for farmers who have suffered losses and applied for the payments. This paper analyses the use of the Income Stabilisation Tool (IST) and compares it to the current CDC scheme in Finland. The Finnish Farm Accountancy Data Network (FADN) is used to simulate the costs of IST compensation payments. Special attention is paid to pig farms and their possibilities to manipulate the IST. Results show that the IST is triggered with a high frequency on Finnish farms. The IST would be more costly than the current CDC programme. The results also suggest that the IST would act as an income...

Tipo: Presentation

Palavras-chave: Income stabilization tool; Moral hazard; Farm Accountancy Data Network; Farm Management; Risk and Uncertainty; Q14.

Ano: 2012

URL: http://purl.umn.edu/122537

Trust and the Profitability of Rule-Breaking in Grain Production

Hirschauer, Norbert; Musshoff, Oliver.

Malpractice in food production entails unacceptable procedures and undesirable product qualities and other negative material outcomes. Despite their physical implications, behavioural sources of risk have become known as moral hazards. The probability of malpractice increases with attached profits. It decreases with the probability of disclosure and resulting losses. It also decreases with social values, emotional bonds etc. which prevent food producers from yielding to economic temptations. Trust can be generated both by reducing the profitability of malpractice and by enhancing social trust factors. Referring to Hennessy et al. (2003), who conclude that misdirected incentives are a major source of food risk, we focus on the former and analyse the...

Moral Hazard in a Mutual Health-Insurance System: German Knappschaften, 1867-1914

Palavras-chave: Behavioural risk; Moral hazard; Incentive-compatibility; Trust; Crop Production/Industries.

Ano: 2006

URL: http://purl.umn.edu/7754

Guinnane, Timothy W.; Streb, Jochen.

This paper studies moral hazard in a sickness-insurance fund that provided the model for social-insurance schemes around the world. The German Knappschaften were formed in the medieval period to provide sickness, accident, and death benefits for miners. By the mid-nineteenth century, participation in the Knappschaft was compulsory for workers in mines and related occupations, and the range and generosity of benefits had expanded considerably. Each Knappschaft was locally controlled and self-funded, and their admirers saw in them the ability to use local knowledge and good incentives to deliver benefits at low cost. The Knappschaft underlies Bismarck’s sickness and accident insurance legislation (1883 and 1884), which in turn forms the basis of the German...

Nonpoint Source Pollution Taxes and Excessive Tax Burden

Palavras-chave: Sickness insurance; Moral hazard; Knappschaft; Social insurance; Health Economics and Policy; Political Economy; Public Economics; N33; N43; H55; H53; I18.

Ano: 2009

URL: http://purl.umn.edu/54533

Karp, Larry S..

If a regulator is unable to measure firms' individual emissions, an ambient tax can be used to achieve the socially desired level of pollution. With this tax, each firm pays a unit tax on aggregate emissions. In order for the tax to be effective, firms must recognize that their decisions affect aggregate emissions. When firms behave strategically with respect to the tax-setting regulator, under plausible circumstances their tax burden is lower under an ambient tax, relative to the tax which charges firms on the basis of individual emissions. Firms may prefer the case where the regulator is unable to observe individual firm emissions, even if this asymmetric information causes the regulator to tax each firm on the basis of aggregate emissions.

Optimal Incentives Under Moral Hazard and Heterogeneous Agents: Evidence from Production Contracts Data

Palavras-chave: Ambient tax; Nonpoint source pollution; Moral hazard; Asymmetric information; Differential games; Environmental Economics and Policy; D82; H20; H40; Q20.

Ano: 1998

URL: http://purl.umn.edu/25100

Dubois, Pierre; Vukina, Tomislav.

In this paper we develop an analytical framework for the estimation of the structural model parameters of an incentive contract under moral hazard with heterogeneous agents. Using micro level data on swine production contract settlements, we confirm that contract farmers are heterogenous with respect to their risk aversion and that this heterogeneity affects the principal's allocation of production inputs across farmers. Assuming that contracts are optimal, we obtain estimates of a lower and an upper bound of agents' reservation utilities. We show that farmers with higher risk aversion have lower outside opportunities and hence lower reservation utilities.

Determinants of Moral hazard in Microfinance: Empirical Evidence from Joint Liability Lending Schemes in Malawi

Palavras-chave: Contracting; Heterogenous agents; Moral hazard; Livestock Production/Industries; Production Economics; D82; L24; Q12; K32; L51.

Ano: 2005

URL: http://purl.umn.edu/24645

Simtowe, Franklin; Zeller, Manfred; Phiri, Alexander.

Moral hazard is widely reported as a problem in credit and insurance markets, mainly arising from information asymmetry. Although theorists have attempted to explain the success of Joint Liability Lending (JLL) schemes in mitigating moral hazard, empirical studies are rare. This paper investigates the determinants of moral hazard among JLL schemes from Malawi, using group level data from 99 farm and non-farm credit groups. Results reveal that peer selection, peer monitoring, peer pressure, dynamic incentives and variables capturing the extent of matching problems explain most of the variation in the incidence of moral hazard among credit groups. The implications are that Joint Liability Lending institutions will continue to rely on social cohesion and...

A model-based approach to moral hazard in food chains - What contribution do principal-agent-models make to the understanding of food risks induced by opportunistic behaviour?

Palavras-chave: Moral hazard; Joint liability; Dynamic incentives; Group lending; Malawi; Financial Economics.

Ano: 2006

URL: http://purl.umn.edu/25287

COOPERATIVE FORMATION AND FINANCIAL CONTRACTING IN AGRICULTURAL MARKETS

Hirschauer, Norbert.

Food risks may be caused by moral hazard, i.e. by opportunistic behaviour of upstream sellers who exploit the fact that many food product qualities remain uncertain to downstream buyers in the course of conventional market transactions (credence qualities). Due to this lack of market transparency buyers run the risk to pay premium prices for inferior products (quality risks); furthermore, they run the risk to use or consume substances which are harmful (health risks). Therefore, they will want to design optimal contracts and controls preventing opportunistic behaviour. Usually, however, buyers cannot contract contingent on the actions of upstream sellers because they cannot observe them directly (information asymmetry). Motivated by the obviously...

Tipo: Journal Article

Palavras-chave: Food risk; Information asymmetry; Moral hazard; Opportunistic behaviour; Prevention; Principal-agent-model; Traceability; Agribusiness; Farm Management; Research Methods/ Statistical Methods; Risk and Uncertainty.

Ano: 2004

URL: http://purl.umn.edu/97448

Hueth, Brent; Marcoul, Philippe; Ginder, Roger G..

Cooperative formation in agriculture sometimes occurs in response to the exit of a private firm and typically requires substantial equity investment by participating farmers. What economic rationale can explain why farmers are willing to contribute capital to an activity that (apparently) fails to attract non-farm or "private" investment? We hypothesize that farm capital is high cost, relative to that provided by private entrepreneurs (or in other words, that there is a degree of asset fixity in farm capital) but that it engenders greater organizational commitment-which is particularly important when expected market returns are low-on the part of producers. This commitment arises from the indirect incentive properties associated with at-risk capital. We...

Agri-Environmental Policy and Moral Hazard under Output Price and Production Uncertainty

Palavras-chave: Cooperative; Corporate financing; Moral hazard; Vertical integration; Agribusiness.

Ano: 2003

URL: http://purl.umn.edu/18478

Yano, Yuki; Blandford, David.

Several theoretical and empirical models have been developed to examine how risk aversion affects compliance with agri-environmental schemes under asymmetric information and uncertainty. However, none has examined the case where the level of compliance is a continuous variable and producers face simultaneous monitoring, output price and production uncertainty. Treating conservation effort as a continuous variable, we show that risk aversion can mitigate the moral hazard problem in most cases. However, if conservation effort has a risk-increasing impact on production the effect of risk aversion on compliance is ambiguous.

Contract Duration and the Division of Labor in Agricultural Land Leases

Palavras-chave: Agri-environmental schemes; Uncertainty; Moral hazard; Environmental Economics and Policy.

Ano: 2008

URL: http://purl.umn.edu/44323

Yoder, Jonathan K.; Hossain, Ishrat; Epplin, Francis M.; Doye, Damona G..

Short-term contracts provide weak incentives for durable input investment if post-contract asset transfer is difficult. Our model shows that when both agents provide inputs, optimal contract length balances weak incentives of one agent against the other. This perspective broadens the existing contract duration literature, which emphasizes the tradeoff between risk sharing and contract costs. We develop hypotheses and test them based on private grazing contracts from the Southern Great Plains. We find broad support for the implications of our model. For example, landowners provide durable land-specific inputs more often under annual versus multiyear contracts.

Contracts for Grain Biosecurity and Grain Quality

Palavras-chave: Land lease contracts; Moral hazard; Contract duration; Division of labor; Labor and Human Capital; Land Economics/Use; J43; L23; Q15.

Ano: 2005

URL: http://purl.umn.edu/12962

Abougamos, Hoda; White, Benedict; Sadler, Rohan.

The export of grain from Western Australia depends upon a grain supply network that takes grain from farm to port through Cooperative Bulk Handling receival and storage sites. The ability of the network to deliver pest free grain to the port and onto ship depends upon the quality of grain delivered by farmers and the efficacy of phosphine based fumigation in controlling stored grain pests. Phosphine fumigation is critical to the grain supply network because it is the cheapest effective fumigant. In addition, it is also residue free. Unfortunately, over time, common stored-grain pests have evolved to develop resistance to phosphine and there is a risk that phosphine will become less effective and may need to be replaced with more expensive alternative...

Tipo: Presentation

Palavras-chave: Principal-agent model; Supply contracts; Moral hazard; Stored grain; Biosecurity; Crop Production/Industries.

Ano: 2012

URL: http://purl.umn.edu/124216

Understanding and Managing Behavioural Risks -The Case of Food Risks Caused by Malpractice in Poultry Production

Hirschauer, Norbert; Zwoll, Stefan.

The probability that actors in economic relationships break rules increases with the profits they thus expect to earn. It decreases with the probability and level of short- and long-term losses resulting from disclosure. It also decreases with the level of social context factors and intrinsic values which shield actors from yielding to economic temptations. This paper assesses the relative merits of various scientific approaches concerned with risks in economic relationships and outlines their contribution to the study of opportunistic rule-breaking. Since the identification of (misdirected) economic incentives faced by firms and individuals represents the starting point for a systematic analysis of opportunism in any field, we also outline a microeconomic...

The Demand for Specialty-Crop Insurance: Adverse Selection and Inefficiency

Palavras-chave: Asymmetric information; Control theories; Economic misconduct; Game theory; Moral hazard; Principal-agent model; Opportunism; Protective factors; Relational risks; Food Consumption/Nutrition/Food Safety; A13; K32; K42.

Ano: 2006

URL: http://purl.umn.edu/10287

Richards, Timothy J.; Mischen, Pamela.

The twin problems of moral hazard and adverse selection are often blamed for the lack of insurance for many fruits and vegetables. This paper develops an alternative method of testing for adverse selection that uses a two-stage approach to determine the effects of technical inefficiency on the demand for insurance. With this approach, technical inefficiency is interpreted as an indicator of adverse selection. Because there is no active insurance market for many specialty crops, and thin markets for those that are insurable, a contingent valuation approach is used to obtain the data necessary to estimate the demand for three different types of insurance. The results suggest adverse selection may be a deterrent to the viability of extending the breadth of...

Tipo: Journal Article

Palavras-chave: Contingent valuation; Crop insurance; Fruits and vegetables; Moral hazard; Risk; Uncertainty; Agribusiness; Financial Economics; Risk and Uncertainty.

Ano: 1998

URL: http://purl.umn.edu/90435

A Model of Incentive Compatibility under Moral Hazard in Livestock Disease Outbreak Response

Gramig, Benjamin M.; Horan, Richard D.; Wolf, Christopher A..

This paper uses a principal-agent model to examine incentive compatibility in the presence of information asymmetry between the government and individual producers. Prior models of livestock disease have not incorporated information asymmetry between livestock managers and social planners. By incorporating the asymmetry, we investigate the role of incentives in producer behavior that influences the duration and magnitude of a disease epidemic.

Use of Penalties and Rewards in Agri-Environmental Policy

Palavras-chave: Livestock disease; Moral hazard; Principal-agent model; Institutional and Behavioral Economics.

Ano: 2005

URL: http://purl.umn.edu/19200

Yano, Yuki; Blandford, David.

Achieving high compliance rates in incentive-based agri-environmental schemes is an important issue. This paper explores the use of a mixed penalty-reward approach under heterogeneous compliance costs. Specifically, we examine the use of a “compliance reward” under asymmetric information and output price uncertainty. Using a budget-neutral approach, three possible sources of financing are considered: 1. funds obtained by reducing monitoring effort; 2. the proceeds of fines collected from participating farmers who are inspected and found not to be in compliance; and 3. money saved by reducing the number of farmers enrolled. We discuss the advantages and disadvantages of each source of funding and analyze them numerically for both risk-neutral and...

The Application and Modification of Delegation - Agent Model in Agricultural Insurance

Palavras-chave: Agri-environmental policy; Moral hazard; Penalties; Payments for compliance; Q12; Q20; Q28; Q57.

Ano: 2008

URL: http://purl.umn.edu/36873

Xue, Hai-Lian; Zhang, Hai-Xia.

The delegation-agent models in agricultural assurance are established both under the circumstances of information symmetry and information asymmetry. Insurers choose effort level —a* according to the first order optimal condition of at the present stage when the information is symmetric. While the information is asymmetric, the first order optimal condition changed into . In other words, the higher the output, the more and more income of insured. The paper also modifies the models, when the information is symmetric, the insurers determine the effort level of insured—a* based on the first order optimal condition of ; to the contrary, the first order optimal condition would change into . The results show that the insured and the insurers would both benefit...

Tipo: Journal Article

Palavras-chave: Agricultural insurance; Delegation-agent model; Moral hazard; Modification; China; Agribusiness.

Ano: 2010

URL: http://purl.umn.edu/97627

Contract Design for Biodiversity Procurement

Bardsley, Peter; Burfurd, Ingrid.

Market based instruments are proving increasingly effective in biodiversity procurement and in regulatory schemes to preserve biodiversity. The design of these policy instruments brings together issues in auction design, contract theory, biology, and monitoring technology. Using a mixed adverse selection, moral hazard model, we show that optimal contract design may differ significantly between procurement and regulatory policy environments.

Reduction of Behavioural Food Risks: An Analysis of Economic Incentives and Social Context Factors in the German Poultry Chains

Palavras-chave: Biodiversity; Procurement; Adverse selection; Moral hazard; Contract theory.

Ano: 2009

URL: http://purl.umn.edu/48047

Zwoll, Stefan; Hirschauer, Norbert.

This paper describes an interdisciplinary research project carried out on behalf of the Federal Ministry of Consumer Protection, Food and Agriculture. The project combines the knowledge of food experts with decision-orientated approaches from microeconomics and the social sciences. It examines what it is that makes food business operators (from the feed industry to the retail trade) break (or not break) rules. Through the analysis of both economic incentives and social context factors, the project aims at contributing to an adequate design of prevention measures. Four offence-prone regulations identified in the course of the ongoing project are exemplarily examined with regard to the present incentive situation.

Aligning Incentives for Contract Dairy Heifer Growth

Palavras-chave: Asymmetric information; Moral hazard; Opportunistic malpractice; Poultry; Agribusiness; Food Consumption/Nutrition/Food Safety.

Ano: 2006

URL: http://purl.umn.edu/7730

Olynk, Nicole J.; Wolf, Christopher A..

As dairy farms grow and specialize in milking cows, raising replacement heifers is increasingly outsourced. Perhaps the largest challenge of outsourcing the heifer enterprise involves quality, measured as milk production potential, and the possibility for moral hazard due to hidden action on the part of the custom heifer grower. A principal-agent framework was used to elicit contract terms to provide incentives for the heifer grower to achieve desired growth rates, and enable the return of the heifer to the dairy farm on an accelerated time frame, without sacrificing quality. To mitigate incentive asymmetries, bonuses and deductions are proposed.

Tipo: Journal Article

Palavras-chave: Contracts; Heifer growth; Moral hazard; Principal agent; Livestock Production/Industries.

Ano: 2010

URL: http://purl.umn.edu/99109

A Cost Function Analysis of Crop Insurance Moral Hazard and Agricultural Chemical Use

Liang, Yan; Coble, Keith H..

This paper employs a cost function analysis method to investigate the existence of moral hazard in cotton buy-up insurance. The trans-log cost function estimates of the own-price elasticity of fertilizer, herbicide, and insecticide is -0.222, -0.143, and -0.121, respectively for Mississippi cotton production. Our results found statistically significant relationship between per acre direct cost and cotton buy-up insurance for year 2001 and 2005 in Mississippi. Our results also indicate that moral hazard can either decrease or increase agricultural input usage depending specific production condition in an individual year. But in general the results support effects smaller than anecdotal evidence would suggest.