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The Impacts of Federal Crop Insurance on Rural Economies

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  • Liao, Yanjun (Penny)
  • Walls, Margaret
  • Druckenmiller, Hannah

Abstract

This paper studies the economic impacts of the Federal Crop Insurance Program (FCIP) on rural communities, focusing on both the agricultural sector and broader effects beyond direct benefits to farmers. Using a panel of U.S. counties from 1991 to 2019, we link FCIP enrollment and indemnities to local employment and business establishments across industries. We exploit variation in extreme heat exposure and estimate how FCIP moderates its economic impacts. The findings show that extreme heat significantly dampens employment and establishment growth, particularly in agricultural industries. However, FCIP enrollment substantially mitigates these adverse effects and generates positive spillovers to non-tradable sectors such as retail, hospitality, and healthcare. Back-of-the-envelope calculations suggest FCIP preserved over 40,000 rural jobs annually, with growing impacts over time. These findings highlight FCIP’s role in supporting the broader rural labor markets should be considered in policy discussions.

Suggested Citation

  • Liao, Yanjun (Penny) & Walls, Margaret & Druckenmiller, Hannah, 2025. "The Impacts of Federal Crop Insurance on Rural Economies," 2025 AAEA & WAEA Joint Annual Meeting, July 27-29, 2025, Denver, CO 361112, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea25:361112
    DOI: 10.22004/ag.econ.361112
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