Moral Hazard Problem in Pest Management

What is the challenge?

Crop pests negatively affect food security and farmer incomes, while chemical pesticide use affects the environment and farmer and consumer health, especially in developing countries. Relying on a unique set of field data collected in 2014 in Cambodia and Vietnam under the CGIAR Research Program on Water, Land and Ecosystems, this comparative research aims to improve our understanding of how perceptions of health risks and risk preferences jointly affect farmers’ pesticide and other input use, and offers insights for the design of policy measures to mitigate smallholders’ financial and health risks and promote more socially and environmentally responsible pest management approaches. 

Farmers’ risk preferences play an important role in agricultural production decisions. For profit-maximizing farmers, pesticides are a risk-reducing input; therefore more risk averse farmers are often found to use more pesticides. Pesticide use can impose health risks to both producers and consumers, therefore, perceptions of such health risks are also expected to influence farmers’ pesticide use behavior. We investigate perceptions of pesticide-related health risks along multiple dimensions, including farmers’ awareness of the hazardousness of pesticides for farmers and their families, past experience with acute pesticide poisoning, application decision-making and practices (e.g., wearing protective clothing, choosing pesticide products and application doses), disposal and storage (e.g., location, method and disposal of used containers), and households’ motivations for maintaining a home garden. One might expect more health-conscious farmers to use less pesticide. However, this effect may be further complicated by farmers’ general attitude toward production- or health-related risks, as pesticide use is also tied to the risk of crop damage or failure. Therefore, it is essential to consider the interaction between farmers’ risk preferences and perceptions of health risks when investigating farmers’ pesticide use behavior, and more generally, input use in crop production. 

When farmers make decisions on pesticide use in home garden plots, the effects of pesticide use on profitability, producer health risk, and consumer health risk are all relevant. For commercial plots, effects on consumers’ health risk may be overlooked or carry less weight due to information asymmetry and lack of effective regulation – a feedback may not exist back to the marketability of the farmer’s production, and the link to the farmer’s own health is broken. This poses a potential moral hazard problem, in which farmers practice more intensive pesticide applications in commercial plots than home gardens. Such differences in farmers’ pesticide practices between commercial plots and home gardens are likely influenced by considerations for profitability, producer health risk, and consumer health risks. Our analysis will tease out the impact of each factor and identify the presence and effect of the moral hazard problem on pesticide use behavior, accounting for the joint effect of farmers’ risk preferences and perceptions of health risks.

Key research questions

This project will address the following research questions:

  1. How do perceptions of health risks and risk preferences jointly affect farmers’ pest management behavior and input use? And how do impacts of risk preferences and perceptions of health risks differ between Cambodia and Vietnam?
  2. How do determinants of pesticide use behavior differ between plots managed for own consumption (home garden plots) and plots managed for markets (commercial plots)? To what extent do the interaction between farmers’ perceptions of health risks and risk preferences contributes to the differences? 
  3. What policy recommendations can reduce both producers’ and consumers’ health risks while sustaining agricultural incomes?

Partners 

Society for Community Development - Cambodia, Institute for Agriculture Environment - Vietnam

 

Contact 

Wei Zhang
Research Fellow
Environment and Production Technology

Acknowledgements

This project is funded by the CGIAR’s research program on Water Land Ecosystems (WLE). The survey data were collected under the project “Mobile agent-based ecosystem services management in smallholder landscape,” funded by WLE (2013-2015).