Abstract
Abstract I study asymmetric information in crop insurance in the Philippines using a two-level randomized field experiment and incentivized preference elicitation. In this first experimental study of moral hazard in non-health insurance, preventable damages double on randomly insured plots among farmers with high trust in the insurance provider. Farmers prefer insurance on plots that are at risk of floods and crop diseases, a sign of classic adverse selection, and plots that are far away from home, a sign of selection on anticipated moral hazard behavior, resulting in 72% higher payouts on preferred plots. Overcoming these challenges requires leveraging new technologies.
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