CROP INSURANCE, MORAL HAZARD, AND AGRICULTURAL CHEMICAL USE

This study examines the relationship between chemical input use and cr op insurance purchase decisions for a sample of Kansas dryland wheat f armers. Recent research by Horowitz and Lichtenberg indicated that, co ntrary to conventional wisdom, farmers that purchased insurance tended to use relatively more chemical inputs than farmers who did not insur e. In contrast, our results confirm the conventional view that moral h azard incentives lead insured farmers to use fewer chemical inputs. Im plications for the joint determination of insurance and input use deci sions and appropriate estimation techniques are discussed.