NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Does The Samaritan's Dilemma Matter? Evidence From U.S. Agriculture

Tatyana Deryugina, Barrett Kirwan

NBER Working Paper No. 22845
Issued in November 2016, Revised in May 2017
NBER Program(s):EEE, PE

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.

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Document Object Identifier (DOI): 10.3386/w22845

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