Supply of Insurance for Specialty Crops and its Effect on Yield and Acreage
We exploit variation in the timing of specialty crop insurance supply to different crops and counties in California to assess its effect on output as decomposed into yield and harvested acreage. Four woody-perennial crops and one field-annual crop are used to represent this effect. We find that the supply of crop insurance has a significant positive effect on output for several perennial crops and the field crop, but it only has a significant positive effect on yield for certain perennial crops. These findings suggest that even for disparate crops the supply of insurance reduces production risks for the insured crops and causes harvested acreage to expand. The positive significant effect of insurance supply on yield for several of the woody-perennial crops suggests that, regardless of the effect on acreage, it accelerates growers’ adoption of improved tree/vine varieties and rootstocks, which are likely to be risk-increasing inputs due to the their relatively high cost of investment.
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