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Crop Insurance, Acreage Decisions, and Nonpoint-Source Pollution

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  • JunJie Wu

Abstract

The redirection of farm policy in the 1996 farm bill has generated much interest in seeking environmentally friendly and economically viable ways to protect farm income. Agricultural insurance has been suggested as such an instrument. This article estimates the effect of crop insurance on crop mix and the resulting change in chemical use in the Central Nebraska Basin. Providing corn insurance will shift land from hay and pasture to corn, which will increase chemical use at the extensive margin. This extensive-margin effect dominates the effect of crop insurance on the application rate, leading to an increase in total chemical use. Copyright 1999, Oxford University Press.

Suggested Citation

  • JunJie Wu, 1999. "Crop Insurance, Acreage Decisions, and Nonpoint-Source Pollution," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(2), pages 305-320.
  • Handle: RePEc:oup:ajagec:v:81:y:1999:i:2:p:305-320
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