Crop Insurance, Farm Input Use, and Moral Hazard Heterogeneous Effects of Crop Insurance on Farm Input Use across Farm Types

This article examines changes in farm input use in agricultural production induced by crop insurance participation as evidence of moral hazard behaviors. We focus on heterogeneous effects across farm groups characterized by various farm-specific characteristics, rather than the average effect of farms as a whole, which has relatively little attention in the literature. For data, we use the Farm Household Economy Survey, focusing on rice farms. We use the causal forest method to identify the heterogeneous effects. The results show substantial heterogeneous effects of the crop insurance participation on fertilizer use in agriculture, implying heterogeneity in moral hazard among farms. This article also reports which farm characteristics are important to describe the patterns of the heterogeneity effects.