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U.S. Cotton Acreage Response Due to Subsidized Crop Insurance

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  • Tronstad, Russell
  • Bool, Romilee

Abstract

U.S. farm policy has undergone a series of premium subsidy increases since 1994 to make crop insurance more affordable to farmers. Previous research shows that subsidized crop insurance may cause farmers to shift or expand their production. This study models the acreage response of U.S. cotton at the county level to subsidized crop insurance using simultaneous insurance participation and acreage response equations. Results of panel data analyses from 1995 to 2005 suggest that higher insurance benefits, such as subsidy per unit of production, encourages crop insurance participation which then stimulates additional crop acreage. In addition, counties with relatively low yields are more responsive to insurance participation and acreage than high yielding counties. Empirical evidence implies that crop insurance policies for cotton are shifting the regional comparative advantage of production from relatively high yielding and quality counties to lower yielding and quality counties.

Suggested Citation

  • Tronstad, Russell & Bool, Romilee, 2010. "U.S. Cotton Acreage Response Due to Subsidized Crop Insurance," 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado 61455, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea10:61455
    DOI: 10.22004/ag.econ.61455
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    References listed on IDEAS

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    9. Barry K. Goodwin & Monte L. Vandeveer & John L. Deal, 2004. "An Empirical Analysis of Acreage Effects of Participation in the Federal Crop Insurance Program," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(4), pages 1058-1077.
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    Cited by:

    1. Anthony Becker & Rebecca Judge, 2014. "Evidence of Distortionary Effects of Decoupled Payments in U.S. Indica Rice Production," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 42(3), pages 265-275, September.
    2. Anthony D. Becker & Rebecca P. Judge, 2012. "Measuring the Effects of Decoupled Payments on Indica Rice Production Under the 1996 and 2002 Farm Bills," Working Papers 201201, St. Olaf College, Department of Economics.
    3. Zhifeng Zhang & Haodong Xu & Shuangshuang Shan & Qingzhi Liu & Yuqi Lu, 2022. "Whether the Agricultural Insurance Policy Achieves Green Income Growth—Evidence from the Implementation of China’s Total Cost Insurance Pilot Program," IJERPH, MDPI, vol. 19(2), pages 1-20, January.
    4. Becker, Anthony D. & Judge, Rebecca P., 2012. "Measuring the Effects of Decoupled Payments on Indica Rice Production Under the 1996 and 2002 Farm Bills," Working Papers 120073, St. Olaf College, Department of Economic.

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