Journal of
Accounting and Taxation

  • Abbreviation: J. Account. Taxation
  • Language: English
  • ISSN: 2141-6664
  • DOI: 10.5897/JAT
  • Start Year: 2009
  • Published Articles: 92

Full Length Research Paper

Agricultural insurance in Ecuador: Evidence of asymmetric information

Nancy Medina Carranco
  • Nancy Medina Carranco
  • Doctoral Program in Development Economics, Faculty of Social Sciences (FLACSO) 3, Ecuador, Latin American, USA.
  • Google Scholar


  •  Received: 12 April 2017
  •  Accepted: 10 May 2017
  •  Published: 30 June 2017

Abstract

The agricultural insurance implemented in Ecuador since 2010 is a state subsidized insurance system, which allows small and medium-sized farmers to contract protection policies against losses of their productions, caused mainly by climatic and biological events, or physical damages. Based on the positive correlation test between the insurance coverage and the probability of the accident, the investigation shows the asymmetry of information in the Ecuadorian agricultural insurance. Positive correlation was estimated, both with linear models and with the Probit model. Cross-sectional data were used in the period 2010 to 2013, data pool and panel data.  The results suggest that the insurance system implemented in Ecuador is inefficient. It is therefore recommended that policy makers consider offering other forms of insurance, adopting modalities based on climatic indexes or productivity indexes, which, by saving operating costs, would allow expanding coverage and reaching the groups of farmers most vulnerable to risks.

Key words: Asymmetric information, agricultural insurance, moral hazard, adverse selection, small and medium agricultural producers, Ecuador.