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Does subsidized crop insurance affect farm industry structure? Lessons from the U.S

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  • Azzam, Azzeddine
  • Walters, Cory
  • Kaus, Taylor

Abstract

Farm policies have unintended consequences and subsidized crop insurance is no different. We draw on the theory of long-run competitive equilibrium to estimate the effect of subsidized crop insurance on farm output and number of farms in the U.S. Results show that the subsidy led to fewer and larger farms. To the extent that larger farms benefit disproportionately from other farm subsidies, known to increase farm size, subsidized crop insurance can only contribute to further farm consolidation, with consequences for sustainability and depopulation of rural communities. These unintended effects could make the case for reverting to ad-hoc disaster payment programs.

Suggested Citation

  • Azzam, Azzeddine & Walters, Cory & Kaus, Taylor, 2021. "Does subsidized crop insurance affect farm industry structure? Lessons from the U.S," Journal of Policy Modeling, Elsevier, vol. 43(6), pages 1167-1180.
    • Handle: RePEc:eee:jpolmo:v:43:y:2021:i:6:p:1167-1180
    DOI: 10.1016/j.jpolmod.2021.06.003
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    References listed on IDEAS

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    Cited by:

    1. Ibrahima Sall & Russell Tronstad, 2021. "Simultaneous Analysis of Insurance Participation and Acreage Response from Subsidized Crop Insurance for Cotton," JRFM, MDPI, vol. 14(11), pages 1-20, November.
    2. Kalfin & Sukono & Sudradjat Supian & Mustafa Mamat, 2022. "Insurance as an Alternative for Sustainable Economic Recovery after Natural Disasters: A Systematic Literature Review," Sustainability, MDPI, vol. 14(7), pages 1-18, April.
    3. Rocha, Jr., Adauto B. & Fulginiti, Lilyan E. & Perrin, Richard K. & Walters, Cory G., 2022. "What is the value of crop insurance for Nebraskan farmers?," 2022 Annual Meeting, July 31-August 2, Anaheim, California 322529, Agricultural and Applied Economics Association.
    4. Deping Ye & Shangsong Zhen & Wei Wang & Yunqiang Liu, 2023. "Spatial double dividend from China’s main grain-producing areas policy: total factor productivity and the net carbon effect," Palgrave Communications, Palgrave Macmillan, vol. 10(1), pages 1-22, December.
    5. Hengli Wang & Hong Liu & Danyang Wang, 2022. "Agricultural Insurance, Climate Change, and Food Security: Evidence from Chinese Farmers," Sustainability, MDPI, vol. 14(15), pages 1-17, August.

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    More about this item

    Keywords

    Crop insurance; Farm consolidation; Long-run competitive equilibrium;
    All these keywords.

    JEL classification:

    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • Q15 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Land Ownership and Tenure; Land Reform; Land Use; Irrigation; Agriculture and Environment
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy

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