Beyond the Cropland: The Impact of Conservation Reserve Program on Local Agribusiness Industry

The Conservation Reserve Program (CRP) is one of the most important agrienvironmental policies in the United States. Farmers and landowners retire their land into vegetation cover and receive rental payments paid by the government. Although the program generates well-documented ecosystem benefits, there are debates about its potential negative impact on the local economy. This paper studies the distributional impact of the CRP program on the local agribusiness sector. By leveraging a detailed county-level panel dataset of agricultural expenses, we use an instrumental variable (IV) approach to identify the causal impact of the CRP enrollment acreage and local agricultural expenses. We find that an additional 10% increase in the acreage of CRP enrollment reduces local agricultural expenses by about 0.175% on average. This effect is robust in most regions and expense categories. We also find regional variations in the response between the Southeast and the Midwest.