Moral Hazard and Risk Management in Agri-environmental Policy

Fraser, Robert (2002) Moral Hazard and Risk Management in Agri-environmental Policy. Journal of Agricultural Economics, 53 (3). 475 - 487. ISSN 0021-857X. (The full text of this publication is not available from this repository)

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Official URL
http://10.1111/j.1477-9552.2002.tb00033.x

Abstract

This paper develops the key finding of Ozanne, Hogan and Colman (2001) that risk aversion among farmers ameliorates the moral hazard problem in relation to agri-environmental policy compliance. It is shown that risk averse farmers who face uncertainty in their production income are more likely to comply with such a policy as a means of risk management. In addition, it is shown that a principal who has control over both the level of monitoring and the size of penalty, if detected, can reduce non-compliance by adjustments to these instruments which increase the variance of farmers' income but leave the expected penalty unchanged. It is concluded that risk management by both principals and agents has the potential to diminish the moral hazard problem, especially given proposed developments in agri-environmental policy in the European Union.

Item Type: Article
Subjects: H Social Sciences > HD Industries. Land use. Labor
Divisions: Faculties > Social Sciences > Kent Business School
Depositing User: Robert Fraser
Date Deposited: 11 Sep 2008 14:23
Last Modified: 19 May 2014 13:55
Resource URI: http://kar.kent.ac.uk/id/eprint/5183 (The current URI for this page, for reference purposes)
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