Role of Panel Analysis in Identifying Asymmetric Information with Optional Unit Provision in Federal Crop Insurance
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This paper has a two-fold contribution, first we demonstrate the relationship of spatial,
temporal and residual yield risk estimated from a two-way panel random effects model to
asymmetric information with an optional unit provision in the federal crop insurance program.
Second, the yield risk components are incorporated in a discrete choice model to examine the
presence of asymmetric information due to potential yield switching with optional unit
provisions. Empirical application to 1998 U.S. cotton crop insurance data reveals the presence
of asymmetric information with optional unit provisions.