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

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...

Cooperative Formation and Financial Contracting in Agricultural Markets

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

Ano: 2006

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

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 fails to attract non-farm, or "private" investment? We hypothesize that doing so is a costly mechanism for increasing the maximum penalty farmers face in the case of business failure. For a given market environment, exposing farmers to this risk increases the amount of surplus that can be used to repay lenders, thus expanding the set of market environments in which financing is available. We show how equity investment of this sort can be an efficient organizational response to a...

Contract Duration and the Division of Labor in Agricultural Land Leases

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

Ano: 2004

URL: http://purl.umn.edu/18610

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.

An Interdisciplinary Approach to White-collar Crime in the Food Sector

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

Hirschauer, Norbert; Musshoff, Oliver; Scheerer, Sebastian.

The probability that buyers are deceived with regard to the quality or safety of purchased products (moral hazard) increases with the profits which suppliers can earn through opportunistic behaviour. It decreases with the probability and level of losses that result from disclosure of malpractice. It also decreases with protective factors rooted in the suppliers' social contexts - such as values, emotional bonds etc. - that shield them from yielding to economic temptations. This paper describes how a systematic analysis of economic incentives and social context factors can be provided through an interdisciplinary approach which combines the analytical powers of microeconomics (game theory) and criminology (control theories). The approach is discussed with...

Feasibility of the Income Stabilisation Tool in Finland

Palavras-chave: Asymmetric information; Behavioural food risks; Control theories; Game theory; Moral hazard; Opportunistic malpractice; Agribusiness; Institutional and Behavioral Economics; A13; K32; K42.

Ano: 2006

URL: http://purl.umn.edu/25688

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

Contracts for Grain Biosecurity and Grain Quality

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

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

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.

Contract Design for Biodiversity Procurement

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

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.

Aligning Incentives for Accelerated Heifer Growth in Custom Heifer Growing Contracts

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

Ano: 2009

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

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

Dairy managers today are faced with the decision to either raise their own replacements on the dairy farm or send heifers to a custom heifer grower. The largest potential challenge of contracting out the heifer raising enterprise revolves around the potential for a moral hazard problem because of hidden action on the part of the custom heifer grower. A principal-agent framework was used to elicit contract terms which provide incentives for the custom heifer grower to perform accelerated growth without heifers becoming over-conditioned. In order to provide incentives to custom growers, heifers returned to the dairy farm should be compared in performance to other heifers of similar age. We solve for the price paid per pound of gain, price paid for inch...

Moral hazard and the division of labor in agricultural land leases

Palavras-chave: Farm management; Production economics; Contracts; Heifer growth; Moral hazard; Livestock Production/Industries.

Ano: 2008

URL: http://purl.umn.edu/6077

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

Does Information Change Behavior?

Palavras-chave: Land lease contracts; Moral hazard; Contract duration; Division of labor; Land Economics/Use.

Ano: 2004

URL: http://purl.umn.edu/59366

Huffman, Wallace E..

This paper reviews and synthesizes the theory of information economics and empirical evidence on how information changes the behavior of consumers, households and firms. I show that consumers respond to new information in food experiments but perhaps not in retirement account management. Some seeming perverse consumer/investor decision making may be a result of a complex decision with a low expected payoff.

Aligning Incentives for Contract Dairy Heifer Growth

Palavras-chave: Information economics; Consumer behavior; Behavioral economics; Moral hazard; Adverse selection.; Consumer/Household Economics; Food Consumption/Nutrition/Food Safety; Risk and Uncertainty.

Ano: 2009

URL: http://purl.umn.edu/55938

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 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.

Contracting with Smallholders under Joint Liability

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

Ano: 2005

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

Kaminski, Jonathan.

Replaced with revised version of paper Jan. 11, 2012

Trust and the Profitability of Rule-Breaking in Grain Production

Palavras-chave: Contract farming; Moral hazard; Joint liability; Peer monitoring; Agricultural Finance; Consumer/Household Economics; Farm Management; Financial Economics; Public Economics; Research Methods/ Statistical Methods; D82; L14; 013; Q13.

Ano: 2009

URL: http://purl.umn.edu/93128

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...

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

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

Ano: 2006

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

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

Secure land rental contracts and agricultural investment in two communal areas of KwaZulu-Natal

Dengu, T.; Lyne, Michael C..

This study tests the hypothesis that an efficient rental market for cropland is a significant determinant of agricultural investment in the communal areas of KwaZulu-Natal. An efficient rental market creates an opportunity cost for under-utilisation, which tends to transfer resources to more effective users. The efficiency of a rental market is compromised by the presence of transaction costs that reduce returns for both lessees and lessors. Transaction costs include risk arising from a possible breach of the rental contract. Potential losses caused by a breach of contract can be reduced by introducing a credible third-party to witness the contract. Likewise, moral hazard can be reduced by contracting with trusted persons. Data from household surveys...

Tipo: Journal Article

Palavras-chave: Customary institutions; Insecure land tenure; Rental market; Transaction costs; Moral hazard; Crop production; Land Economics/Use.

Ano: 2007

URL: http://purl.umn.edu/8012

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

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.

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

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

Ano: 2008

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

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

Use of Penalties and Rewards in Agri-Environmental Policy

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...