Estimating the Prevalence and Cost of Yield‐Switching Fraud in the Federal Crop Insurance Program

Abstract

Producers who manipulate and switch their reported crop‐yields between separately insured units can increase their insurance indemnities substantially. A statistical model that identifies potential yield switching is developed. The unrestricted statistical model is singular and is identified by imposing a mixture of system‐estimable and system‐nonestimable restrictions. Lower bound estimates of yield‐switching fraud incidence and costs are obtained by applying the model to 207,067 multiple unit producers who purchased crop insurance in 1998.