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The Environmental Impacts of Subsidized Crop Insurance

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  • LaFrance, Jeffrey T.
  • Shimshack, J. P.
  • Wu, S. Y.

Abstract

A partial equilibrium model of stochastic crop production is used to analyze the environmental impacts of popular subsidized crop insurance programs. Land use is unchanged only when an actuarially fair, perfectly separating insurance contract is offered. For the more typical pooling equilibrium contracts, however, land with a minimum quality that is stricly lower than the minimum quality without insurance will be added to production. In such cases, the environment will be adversely effected. If economically marginal land is also environmentally marginal, pooling crop insurance policies disproportionately contribute to the degradation of the environment. Popular subsidies merely exacerbate the problem.

Suggested Citation

  • LaFrance, Jeffrey T. & Shimshack, J. P. & Wu, S. Y., 2001. "The Environmental Impacts of Subsidized Crop Insurance," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt8m43210k, Department of Agricultural & Resource Economics, UC Berkeley.
    • Handle: RePEc:cdl:agrebk:qt8m43210k
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    References listed on IDEAS

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    1. Bruce A. Babcock & David A. Hennessy, 1996. "Input Demand under Yield and Revenue Insurance," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(2), pages 416-427.
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    4. Thomas O. Knight & Keith H. Coble, 1997. "Survey of U.S. Multiple Peril Crop Insurance Literature Since 1980," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 19(1), pages 128-156.
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