Document Detail

Is moral hazard good for the environment? Revenue insurance and chemical input use.
MedLine Citation:
PMID:  15572077     Owner:  NLM     Status:  MEDLINE    
Using farm level data we evaluate the input use and environmental effects of revenue insurance. A priori, the moral hazard effect on input use is indeterminate. This paper empirically assesses the input use impact of the increasingly popular, and federally subsidized, risk management instrument of revenue insurance and the extent to which its effects on input use may differ from those of the older yield based instruments. We conclude that among winter wheat farmers, those who purchase revenue insurance tend to spend less on fertilizers but do not appreciably alter pesticide expenditures. Thus, any improved environmental outcomes due to crop insurance are likely due to reduced fertilizer not pesticide use. When the environmental indicators included indicated a potential environmental fragility (i.e. high erosion, pesticide leaching or pesticide runoff potential), the input use equation suggested that fertilizer expenditures decreased. Revenue insurance undoubtedly further reduces fertilizer applications on these fields as well, but the marginal environmental benefit of revenue insurance is lessened because the reduction, where it matters most, accrues on land on which fertilizer use has already been curtailed to some degree.
Ashok K Mishra; R Wesley Nimon; Hisham S El-Osta
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Publication Detail:
Type:  Journal Article    
Journal Detail:
Title:  Journal of environmental management     Volume:  74     ISSN:  0301-4797     ISO Abbreviation:  J. Environ. Manage.     Publication Date:  2005 Jan 
Date Detail:
Created Date:  2004-12-01     Completed Date:  2005-04-22     Revised Date:  -    
Medline Journal Info:
Nlm Unique ID:  0401664     Medline TA:  J Environ Manage     Country:  England    
Other Details:
Languages:  eng     Pagination:  11-20     Citation Subset:  IM    
Resource Economic Division, Economic Research Service, USDA, 1800 M Street, NW, Washington, DC 20036 5831, USA.
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MeSH Terms
Fertilizers / utilization*
Financing, Government
Models, Theoretical*
Soil Pollutants
United States
Reg. No./Substance:
0/Fertilizers; 0/Pesticides; 0/Soil Pollutants

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