Graduation Year

2025

Date of Submission

4-2025

Document Type

Campus Only Senior Thesis

Degree Name

Bachelor of Arts

Department

Government

Reader 1

Shanna Rose

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Abstract

With the 2018 Farm Bill expiring this September discussions around agricultural subsidies have taken center stage once again. Among the most controversial programs is federal crop insurance. The program is intended to promote and protect American agriculture by providing a safety net. However, while crop insurance may protect a farmer’s income, it may also encourage behavior changes. A decrease in risk may actually promote the assumption of new risks in order to maintain the preferred level of risk tolerance. This phenomenon is known as moral hazard.

Moral hazard in crop insurance occurs when a farmer engages in new risky behavior as a result of crop insurance. This study will attempt to discover the potential moral hazard associated with an increase in crop insurance premium subsidies. The theory is that as a farmer’s risk is decreased through an increase in crop insurance premium subsidies, they will decrease their farming inputs, increasing the risk of production in order to remain at their basic level of risk tolerance. The results of the regression suggest a correlation where as farmers insurance premiums become more subsidized there is a resulting decrease in farm inputs.

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