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Federal Crop Insurance and the Disincentive to Adapt to Extreme Heat

Author

Listed:
  • Francis Annan
  • Wolfram Schlenker

Abstract

Despite significant progress in average yields, the sensitivity of corn and soybean yields to extreme heat has remained relatively constant over time. We combine county-level corn and soybeans yields in the United States from 1989-2013 with the fraction of the planting area that is insured under the federal crop insurance program, which expanded greatly over this time period as premium subsidies increased from 20 percent to 60 percent. Insured corn and soybeans are significantly more sensitive to extreme heat that uninsured crops. Insured farmers do not have the incentive to engage in costly adaptation as insurance compensates them for potential losses.

Suggested Citation

  • Francis Annan & Wolfram Schlenker, 2015. "Federal Crop Insurance and the Disincentive to Adapt to Extreme Heat," American Economic Review, American Economic Association, vol. 105(5), pages 262-266, May.
  • Handle: RePEc:aea:aecrev:v:105:y:2015:i:5:p:262-66
    Note: DOI: 10.1257/aer.p20151031
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    Citations

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    Cited by:

    1. Rejesus, R. & Park, S. & Zheng, X. & Goodwin, G., 2018. "How does a Fraud Mitigation Program Influence Insurance Claims filing Behavior? Evidence from the "Spot Check List" Program in U.S. Crop Insurance," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277452, International Association of Agricultural Economists.
    2. Regmi, Madhav & Tack, Jesse B., 2018. "Does Crop Insurance Enrollment Exacerbate the Negative Effects of Extreme Heat? A Farm-level Analysis," 2018 Annual Meeting, August 5-7, Washington, D.C. 274468, Agricultural and Applied Economics Association.
    3. repec:spr:climat:v:144:y:2017:i:2:d:10.1007_s10584-017-2033-x is not listed on IDEAS
    4. Hongliang Zhang & Jianhong E. Mu & Bruce A. McCarl, 2018. "Adaptation to Climate Change via Adjustment in Land Leasing: Evidence from Dryland Wheat Farms in the U.S. Pacific Northwest," IRENE Working Papers 18-02, IRENE Institute of Economic Research.
    5. Mérel, Pierre & Gammans, Matthew, 2018. "Climate econometrics: Can the panel approach account for long-run adaptation?," 2018 Annual Meeting, August 5-7, Washington, D.C. 274399, Agricultural and Applied Economics Association.
    6. repec:nbr:nberch:13941 is not listed on IDEAS
    7. Wang, Yang & Annan, Francis, 2016. "On the Demand for Federal Crop Insurance," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235250, Agricultural and Applied Economics Association.
    8. Connor, Lawson & Marlow, Scott & Rejesus, Roderick M., "undated". "Effect of the Federal Crop Insurance Program on Cover Crop Adoption," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 259957, Agricultural and Applied Economics Association.
    9. repec:cup:endeec:v:23:y:2018:i:03:p:349-368_00 is not listed on IDEAS
    10. Park, Jisung & Bangalore, Mook & Hallegatte, Stephane & Sandhoefner, Evan, 2018. "Households and heat stress: estimating the distributional consequences of climate change," Environment and Development Economics, Cambridge University Press, vol. 23(03), pages 349-368, June.
    11. Meyers, Keith A., 2017. "In the Shadow of the Mushroom Cloud: Nuclear Testing, Radioactive Fallout and Damage to U.S. Agriculture," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 258121, Agricultural and Applied Economics Association.
    12. Solomon Hsiang & Paulina Oliva & Reed Walker, 2017. "The Distribution of Environmental Damages," NBER Working Papers 23882, National Bureau of Economic Research, Inc.
    13. repec:bla:agecon:v:49:y:2018:i:5:p:635-647 is not listed on IDEAS

    More about this item

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • Q14 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Finance
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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