We have seen that moral hazard restricts the scope of insurance: if unobserved effort must be expended to produce efficient levels of output, then such effort may not be forthcoming in the presence of insurance. Review the relevant arguments in this chapter. Now,

(i) Discuss if poor farming groups are more or less likely to be prone to this problem than rich farming groups and

(ii) Show that a mixture of group credit and insurance (rather than pure insurance alone) may help avoid the moral hazard problem.