The behavioural economics of health protection: an empirical evidence of moral hazard in U.S. hog farms

Healthy workers are productive. When firms could not pay according to worker's health preventative effort levels due to asymmetric information, they provide an incentive contract to cope with the moral hazard problem. We test the existence of ex ante moral hazard in the U.S. hog farms. Using a national employee survey data in 1995 and in 2000, we find that even though employers provide protective devices to reduce the negative effects of poor environmental conditions on employees’ respiratory health, many employees do not wear the devices, which is consistent with the moral hazard behaviours. The probability of using a protective device is 10 per cent lower in the farms with an agency problem than in family farms without an agency problem, even after we control for medical insurance provision types. Reducing pollutants, providing protective devices and instilling the importance of using masks help to alleviate moral hazard incidences.