IDEAS home Printed from https://ideas.repec.org/p/ags/aaea25/361112.html
   My bibliography  Save this paper

The Impacts of Federal Crop Insurance on Rural Economies

Author

Listed:
  • 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
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/361112/files/75321_95242_105300_submission_liao.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.22004/ag.econ.361112?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Francis Annan & Wolfram Schlenker, 2015. "Federal Crop Insurance and the Disincentive to Adapt to Extreme Heat," American Economic Review, American Economic Association, vol. 105(5), pages 262-266, May.
    2. Burke, M. & Craxton, M. & Kolstad, C.D. & Onda, C. & Allcott, H. & Baker, E. & Barrage, L. & Carson, R. & Gillingham, K. & Graff-Zivin, J. & Greenstone, M. & Hallegatte, S. & Hanemann, W.M. & Heal, G., 2016. "Opportunities for advances in climate change economics," ISU General Staff Papers 3565, Iowa State University, Department of Economics.
    3. Burke, M & Craxton, M & Kolstad, CD & Onda, C & Allcott, H & Baker, E & Barrage, L & Carson, R & Gillingham, K & Graf-Zivin, J & Greenstone, M & Hallegatte, S & Hanemann, WM & Heal, G & Hsiang, S & Jo, 2016. "Opportunities for advances in climate change economics," University of California at Santa Barbara, Recent Works in Economics qt4tc5d9pb, Department of Economics, UC Santa Barbara.
    4. Solomon M. Hsiang, 2016. "Climate Econometrics," NBER Working Papers 22181, National Bureau of Economic Research, Inc.
    5. Paggi, Mechel S. & Rosson, C. Parr, III & Adcock, Flynn J. & Hanselka, Daniel D., 2011. "National and Regional Impacts of U.S. Agricultural Exports," Choices: The Magazine of Food, Farm, and Resource Issues, Agricultural and Applied Economics Association, vol. 26(01), pages 1-6.
    6. Millner, Antony & McDermott, Thomas K. J., 2016. "Model confirmation in climate economics," LSE Research Online Documents on Economics 67122, London School of Economics and Political Science, LSE Library.
    7. Solomon Hsiang, 2016. "Climate Econometrics," Annual Review of Resource Economics, Annual Reviews, vol. 8(1), pages 43-75, October.
    8. Elena G. Irwin & Andrew M. Isserman & Maureen Kilkenny & Mark D. Partridge, 2010. "A Century of Research on Rural Development and Regional Issues," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 92(2), pages 522-553.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Pierre Mérel & Matthew Gammans, 2021. "Climate Econometrics: Can the Panel Approach Account for Long‐Run Adaptation?," American Journal of Agricultural Economics, John Wiley & Sons, vol. 103(4), pages 1207-1238, August.
    2. Hrozencik, Robert A. & Rouhi Rad, Mani & Uz, Dilek, 2023. "Electricity Demand by the Irrigated Sector in Response to Climatic Shocks," 2023 Annual Meeting, July 23-25, Washington D.C. 335469, Agricultural and Applied Economics Association.
    3. Serkan Aglasan & Barry K. Goodwin & Roderick M. Rejesus, 2023. "Risk effects of GM corn: Evidence from crop insurance outcomes and high‐dimensional methods," Agricultural Economics, International Association of Agricultural Economists, vol. 54(1), pages 110-126, January.
    4. Lis-Castiblanco, Catherine & Jordi, Louis, 2024. "Adaptation to Frost and Heat Risks in French Viticulture: Are Grape Growers Dumb Farmers?," 2024 Annual Meeting, July 28-30, New Orleans, LA 343569, Agricultural and Applied Economics Association.
    5. Chen, Le & Rejesus, Roderick M. & Aglasan, Serkan & Park, Byungyul & Hagen, Stephen & Salas, William, 2021. "The Impact of Cover Crops and No-Till Systems on Soil Erosion," 2021 Annual Meeting, August 1-3, Austin, Texas 314005, Agricultural and Applied Economics Association.
    6. repec:ags:aaea22:335469 is not listed on IDEAS
    7. Aragón, Fernando M. & Restuccia, Diego & Rud, Juan Pablo, 2022. "Are small farms really more productive than large farms?," Food Policy, Elsevier, vol. 106(C).
    8. Lamperti, Francesco & Bosetti, Valentina & Roventini, Andrea & Tavoni, Massimo & Treibich, Tania, 2021. "Three green financial policies to address climate risks," Journal of Financial Stability, Elsevier, vol. 54(C).
    9. repec:ags:aaea22:335440 is not listed on IDEAS
    10. Doremus, Jacqueline M. & Jacqz, Irene & Johnston, Sarah, 2022. "Sweating the energy bill: Extreme weather, poor households, and the energy spending gap," Journal of Environmental Economics and Management, Elsevier, vol. 112(C).
    11. Clément Nedoncelle & Julien Wolfersberger, 2025. "Weather shocks and firm exports in developing countries," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 161(2), pages 743-784, May.
    12. Isabelle Chort & Maëlys de la Rupelle, 2022. "Managing the impact of climate on migration: evidence from Mexico," Journal of Population Economics, Springer;European Society for Population Economics, vol. 35(4), pages 1777-1819, October.
    13. Nicola Garbarino, 2025. "Concrete Adaptation under Extreme Precipitation," ifo Working Paper Series 419, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    14. Zhengtao Li & Bin Hu, 2025. "Temperature Effects on People’s Subjective Well-Being and Their Subjective Adaptation: Empirical Evidence from China," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 177(3), pages 1081-1112, April.
    15. Albuquerque Sant'Anna, André, 2018. "Not So Natural: Unequal Effects of Public Policies on the Occurrence of Disasters," Ecological Economics, Elsevier, vol. 152(C), pages 273-281.
    16. Pretis, Felix, 2020. "Econometric modelling of climate systems: The equivalence of energy balance models and cointegrated vector autoregressions," Journal of Econometrics, Elsevier, vol. 214(1), pages 256-273.
    17. Cristina Cattaneo & Emanuele Massetti, 2019. "Does Harmful Climate Increase Or Decrease Migration? Evidence From Rural Households In Nigeria," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 10(04), pages 1-36, November.
    18. Emediegwu, Lotanna Ernest, 2023. "Assessing the (a)symmetric effect of global climate anomalies on food prices: Evidence from local prices," 97th Annual Conference, March 27-29, 2023, Warwick University, Coventry, UK 334555, Agricultural Economics Society - AES.
    19. Kalkuhl, Matthias & Wenz, Leonie, 2020. "The impact of climate conditions on economic production. Evidence from a global panel of regions," Journal of Environmental Economics and Management, Elsevier, vol. 103(C).
    20. Kahn, Matthew E. & Mohaddes, Kamiar & Ng, Ryan N.C. & Pesaran, M. Hashem & Raissi, Mehdi & Yang, Jui-Chung, 2021. "Long-term macroeconomic effects of climate change: A cross-country analysis," Energy Economics, Elsevier, vol. 104(C).
    21. Obradovich, Nicholas & Fowler, James H., 2017. "Climate change may alter human physical activity patterns," Scholarly Articles 36874928, Harvard Kennedy School of Government.
    22. Tol, Richard S. J., "undated". "The Economic Impact of Weather and Climate," FEEM Working Papers 309917, Fondazione Eni Enrico Mattei (FEEM).

    More about this item

    Keywords

    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:aaea25:361112. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/aaeaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.