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The Environmental Consequences of Subsidized Risk Management and Disaster Assistance Programs

Author

Listed:
  • Vincent H. Smith

    (Department of Economics and Agricultural Economics, Montana State University, Bozeman, Montana 59717)

  • Barry K. Goodwin

    (Departments of Economics and Agricultural and Resource Economics, North Carolina State University, Raleigh, North Carolina 27695)

Abstract

Federal subsidized crop insurance has been a major fixture of US agricultural policies for the past several decades. In recent years, the program has expanded rapidly and now constitutes the largest and most expensive agricultural subsidy initiative in the United States. Similar programs have been introduced around the world. All these programs have one common denominator: Absent generous subsidies, participation is minimal. Such subsidies introduce the potential for a wide range of distortions. Intensive margin distortions may result from moral hazard as insured growers alter their production practices. Distortions at the extensive margin may arise as acreage decisions reflect the presence of subsidized risk management, resulting in lands with alternative uses being planted to crops. A range of environmental effects may arise as a result of these distortions. Not all those effects are negative, because subsidized insurance may result in less intensive use of chemical and fertilizer inputs. We review the history and operation of the current program and discuss the options currently being deliberated for future crop insurance programs.

Suggested Citation

  • Vincent H. Smith & Barry K. Goodwin, 2013. "The Environmental Consequences of Subsidized Risk Management and Disaster Assistance Programs," Annual Review of Resource Economics, Annual Reviews, vol. 5(1), pages 35-60, June.
    • Handle: RePEc:anr:reseco:v:5:y:2013:p:35-60
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    File URL: http://www.annualreviews.org/doi/abs/10.1146/annurev-resource-110811-114505
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    Citations

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    Cited by:

    1. Wilcox, Steven W. & Barrett, Christopher B. & Jensen, Nathaniel & Sun, Ying & Clark, Patrick & Soto, Gerardo E. & Kahiu, Njoki & Fava, Francesco P. & Porter, Benjamin, 2023. "The Environmental Impacts of Microfinance: An Empirical Study of Index-Based Livestock Insurance and East African Rangelands," 2023 Annual Meeting, July 23-25, Washington D.C. 335917, Agricultural and Applied Economics Association.
    2. Zhifeng Zhang & Haodong Xu & Shuangshuang Shan & Qingzhi Liu & Yuqi Lu, 2022. "Whether the Agricultural Insurance Policy Achieves Green Income Growth—Evidence from the Implementation of China’s Total Cost Insurance Pilot Program," IJERPH, MDPI, vol. 19(2), pages 1-20, January.
    3. Zhifeng Zhang & Haodong Xu & Shuangshuang Shan & Yuqi Lu & Hongyan Duan, 2022. "The Impact of Ecological Civilization Construction on Environment and Public Health—Evidence from the Implementation of Ecological Civilization Demonstration Area in China," IJERPH, MDPI, vol. 19(9), pages 1-19, April.
    4. Niklas Möhring & Martina Bozzola & Stefan Hirsch & Robert Finger, 2020. "Are pesticides risk decreasing? The relevance of pesticide indicator choice in empirical analysis," Agricultural Economics, International Association of Agricultural Economists, vol. 51(3), pages 429-444, May.
    5. Yuqiang Gao & Yongkang Shu & Hongjie Cao & Shuting Zhou & Shaobin Shi, 2021. "Fiscal Policy Dilemma in Resolving Agricultural Risks: Evidence from China’s Agricultural Insurance Subsidy Pilot," IJERPH, MDPI, vol. 18(14), pages 1-11, July.
    6. Joseph Glauber & Vince Smith, 2021. "Trends in US Agricultural Policy since 2000 and Implications for the Next Twenty Years," EuroChoices, The Agricultural Economics Society, vol. 20(2), pages 58-63, August.

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