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Supply and Effects of Specialty Crop Insurance

In: The Intended and Unintended Effects of US Agricultural and Biotechnology Policies

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  • Ethan Ligon

Abstract

The federal government has developed a large number of programs to insure various "specialty crops" over the last two decades; a given program is peculiar to a particular county and crop. This development has been particularly notable in California, because of its size and the diversity of crops produced there. If the extension of federal crop insurance programs to cover fruit and vegetable production has affected either producer or consumer welfare, then we would expect to see this reflected in output and prices. Exploiting variation in the timing of program introduction in different locations for different crops to estimate the effect of crop insurance on the output and prices of the insured crops. We find that the supply of and demand for insurance for tree crops is much larger than for non-tree crops. Crop insurance has a small but significant negative effect on prices of insured crops. This last finding is consistent with the view that demand for such highly disaggregated commodities is likely to be highly elastic. A consequence is that crop insurance for these specialty crops has little benefit for consumers, even when it generates a large supply response.
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Suggested Citation

  • Ethan Ligon, 2011. "Supply and Effects of Specialty Crop Insurance," NBER Chapters, in: The Intended and Unintended Effects of US Agricultural and Biotechnology Policies, pages 113-142, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberch:12110
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    References listed on IDEAS

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    1. Erik J. O’Donoghue & Michael J. Roberts & Nigel Key, 2009. "Did the Federal Crop Insurance Reform Act Alter Farm Enterprise Diversification?," Journal of Agricultural Economics, Wiley Blackwell, vol. 60(1), pages 80-104, February.
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    Cited by:

    1. Belasco, Eric & Galinato, Suzette & Marsh, Tom & Miles, Carol & Wallace, Russell, 2013. "High Tunnels Are My Crop Insurance: An Assessment of Risk Management Tools for Small-scale Specialty Crop Producers," Agricultural and Resource Economics Review, Cambridge University Press, vol. 42(2), pages 403-418, August.
    2. 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.
    3. Shuoli Zhao & Chengyan Yue, 2020. "Risk preferences of commodity crop producers and specialty crop producers: An application of prospect theory," Agricultural Economics, International Association of Agricultural Economists, vol. 51(3), pages 359-372, May.

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    More about this item

    JEL classification:

    • D2 - Microeconomics - - Production and Organizations
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets

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