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Does Federal Crop Insurance Make Environmental Externalities from Agriculture Worse?

Author

Listed:
  • Weber, Jeremy G.
  • Key, Nigel
  • O'Donoghue, Erik

Abstract

Farmers dramatically increased their use of federal crop insurance in the 2000s. From 2000 to 2013, premium subsidies increased seven-fold and acres enrolled increased by 77 percent. Although designed for non-environmental goals, subsidized insurance may affect the use of land, fertilizer, and agrochemicals and therefore environmental externalities from agriculture. Using a novel panel data, we examine farmer responses to changes in coverage with an empirical approach that exploits program limits on coverage that were more binding for some farmers than for others. Estimates indicate that expanded coverage had little effect on the share of farmland harvested, crop specialization, productivity, or fertilizer and chemical use. More broadly, we construct and describe a new nation-wide, farm-level panel data set with nearly 32,500 farms observed at least twice over the 2000-2013 period, a resource that should enrich U.S. agro-environmental research.

Suggested Citation

  • Weber, Jeremy G. & Key, Nigel & O'Donoghue, Erik, 2016. "Does Federal Crop Insurance Make Environmental Externalities from Agriculture Worse?," MPRA Paper 71293, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:71293
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Paudel, Jayash & Crago, Christine L., 2018. "Fertilizer Use and Water Quality in the United States," 2018 Annual Meeting, August 5-7, Washington, D.C. 274312, Agricultural and Applied Economics Association.
    2. repec:bla:ecinqu:v:56:y:2018:i:2:p:983-1006 is not listed on IDEAS
    3. Bigelow, Daniel & Borchers, Allison, 2017. "Major Uses of Land in the United States, 2012," Economic Information Bulletin 263079, United States Department of Agriculture, Economic Research Service.
    4. Ifft, Jennifer & Jodlowski, Margaret, 2018. "Federal crop insurance participation and adoption of sustainable production practices by US corn farms," 166th Seminar, August 30-31, 2018, Galway, West of Ireland 276196, European Association of Agricultural Economists.
    5. repec:nbr:nberch:13941 is not listed on IDEAS
    6. Yu, Jisang & Hendricks, Nathan P., 2017. "Crop Insurance Moral Hazard from Price and Weather Forecasts," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 258336, Agricultural and Applied Economics Association.
    7. Zeng, Shuwei & Du, Xiaodong & Gould, Brian, "undated". "Input/Output Measures and Implication for Productivity Estimates," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 261217, Agricultural and Applied Economics Association.
    8. Ifft, Jennifer & Jodlowski, Margaret, 2018. "Federal crop insurance participation and adoption of sustainable production practices by U.S. farms," SCC-76 Meeting, 2018, April 5-7, Kansas City, Missouri 276148, SCC-76: Economics and Management of Risk in Agriculture and Natural Resources.
    9. Tatyana Deryugina & Barrett Kirwan, 2018. "Does The Samaritan'S Dilemma Matter? Evidence From U.S. Agriculture," Economic Inquiry, Western Economic Association International, vol. 56(2), pages 983-1006, April.
    10. Ghosh, Prasenjit & Miao, Ruiqing, 2018. "Agricultural Irrigation’s Responses to Federal Crop Insurance in the United States," 2018 Annual Meeting, August 5-7, Washington, D.C. 275667, Agricultural and Applied Economics Association.
    11. Ifft, Jennifer & Jodlowski, Margaret, 2017. "Federal crop insurance and agricultural credit use," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 259120, Agricultural and Applied Economics Association.

    More about this item

    Keywords

    Crop insurance; agriculture; environmental externalities; fertilizer;

    JEL classification:

    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • Q15 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Land Ownership and Tenure; Land Reform; Land Use; Irrigation; Agriculture and Environment
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy

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