Working Paper: NBER ID: w22845
Authors: Tatyana Deryugina; Barrett Kirwan
Abstract: The Samaritan’s dilemma posits a downside to charity: recipients may rely on free aid instead of their own efforts. Anecdotally, the expectation of free assistance is thought to be important for decisions about insurance and risky behavior in numerous settings, but reliable empirical evidence is scarce. We estimate whether the Samaritan’s dilemma exists in U.S. agriculture, where both private crop insurance and frequent federal disaster assistance are present. We find that bailout expectations are qualitatively and quantitatively important for the insurance decision. Furthermore, aid expectations reduce both expenditure on farm inputs and subsequent crop revenue.
Keywords: Samaritans Dilemma; disaster aid; crop insurance; moral hazard
JEL Codes: D72; H84; Q18
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| expected disaster payments (H84) | farmers' out-of-pocket insurance expenditure (Q12) |
| expected disaster payments (H84) | insurance coverage (G52) |
| expected disaster payments (H84) | spending on farm labor (J43) |
| expected disaster payments (H84) | spending on fertilizer (Q12) |
| expected disaster payments (H84) | lower price-weighted yields (G12) |
| expected disaster payments (H84) | crop revenues (Q15) |