The Effect of Purchasing Crop Insurance on the Input Utilization and Farm Income

Abstract

We analyze the impact of crop insurance on the input utilization for investigating the moral hazard. The farm with crop insurance is estimated to use less amount of labor. However, crop insurance is not estimated to affect the farmers’ usages of pesticide, seedlings, or fertilizer. In addition, about 30% to 40% of farmers who purchase the crop insurance are estimated to have higher profits in a disaster situation than the farmers with no insurance.