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Did the Federal Crop Insurance Reform Act Alter Farm Enterprise Diversification?

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  • Erik J. O'Donoghue
  • Michael J. Roberts
  • Nigel Key

Abstract

We estimate how much United States farms changed enterprise diversification in response to a marked increase in crop insurance coverage brought about by the 1994 Federal Crop Insurance Reform Act, which substantially increased insurance subsidies. The analysis exploits farm-level panel census data to compare farm-specific changes in enterprise diversification over time. By examining diversification decisions of the same farms over time, we control for time-invariant unobserved individual heterogeneity. We then use pooled cross-sectional data from the United States Department of Agriculture (USDA) Agricultural Resource Management Survey to estimate the relationship between farm diversification and average returns. We find that the insurance subsidies caused a modest increase in enterprise specialisation and production efficiency. Estimated efficiency gains are far less than the subsidies. Copyright Journal compilation (c) 2008 The Agricultural Economics Society. No claim to original US government works.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Journal of Agricultural Economics.

Volume (Year): 60 (2009)
Issue (Month): 1 ()
Pages: 80-104

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Handle: RePEc:bla:jageco:v:60:y:2009:i:1:p:80-104

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Cited by:
  1. Ethan Ligon, 2011. "Supply and Effects of Specialty Crop Insurance," NBER Chapters, in: The Intended and Unintended Effects of U.S. Agricultural and Biotechnology Policies, pages 113-142 National Bureau of Economic Research, Inc.
  2. Chakir, Raja & Hardelin, Julien, 2011. "Hail Insurance and Pesticide use in French agriculture: an empirical analysis of multiple risks management," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114312, European Association of Agricultural Economists.
  3. Olen, Beau & Wu, Junjie, 2013. "Supply of Insurance for Specialty Crops and its Effect on Yield and Acreage," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150787, Agricultural and Applied Economics Association.

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