Economics, Center for Agricultural and Rural Development
Journal or Book Title
Journal of Agricultural and Resource Economics
First Page or Article ID Number
It is well known that insurance market information asymmetry can cause socially excessive cropping of yield-risky land. We show that crop insurance subsidies can cause the same problem absent information failures. Using field-level yield data, we find an inversed U-shaped relationship between crop prices and crop insurance subsidies’ land-use impacts. For seventeen counties in the U.S. Prairie Pothole Region, simulations show that 0.05% to 3.3% (about 2,600 to 157,900 acres) of land under crop insurance would not have been converted from grassland had premium subsidies not existed. Land-use impacts of Sodsaver in the 2014 Farm Act are also quantified.
Western Agricultural Economics Association
Miao, Ruiqing; Hennessy, David A.; and Feng, Hongli, "The Effects of Crop Insurance Subsidies and Sodsaver on Land-Use Change" (2016). Economics Publications. 796.