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Effects of Crop Insurance on Farm Disinvestment and Exit Decisions

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  • Kim, Youngjune
  • Yu, Jisang
  • Pendell, Dustin

Abstract

Over the last two decades, the US federal crop insurance programme expanded rapidly. Despite growing importance of crop insurance programmes, little is known about the relationship between crop insurance and disinvestment and exit decisions of farms. Using a farm-level panel dataset, we parametrically and semi-parametrically estimate the effects of crop insurance on farm disinvestment and farm exits with carefully developed identification strategies. Our estimation results indicate that (i) crop insurance reduces the likelihood of farm exits and (ii) lowers the magnitude of farm disinvestment. The positive and significant effects of crop insurance on farm survival and disinvestment remain robust across different specifications.
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Suggested Citation

  • Kim, Youngjune & Yu, Jisang & Pendell, Dustin, 2019. "Effects of Crop Insurance on Farm Disinvestment and Exit Decisions," SCC-76 Meeting, 2019, April 4-6, Kansas City, Missouri 288092, SCC-76: Economics and Management of Risk in Agriculture and Natural Resources.
    • Handle: RePEc:ags:scc019:288092
    DOI: 10.22004/ag.econ.288092
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    Cited by:

    1. Yuyun Hidayat & Sukono & Betty Subartini & Nida Khairunnisa & Aceng Sambas & Titi Purwandari, 2022. "An Estimated Analysis of Willingness to Wait Time to Pay Rice Agricultural Insurance Premiums Using Cox’s Proportional Hazards Model," Mathematics, MDPI, vol. 10(21), pages 1-16, October.
    2. Jaka Cepec & Peter Grajzl & Barbara Mörec, 2022. "Public cash and modes of firm exit," Journal of Evolutionary Economics, Springer, vol. 32(1), pages 247-298, January.
    3. K. Aleks Schaefer & Daniel P. Scheitrum & Steven van Winden, 2022. "Returns on investment to the British bovine tuberculosis control programme," Journal of Agricultural Economics, Wiley Blackwell, vol. 73(2), pages 472-489, June.
    4. Roman Neyter & Oleg Nivievskyi, 2023. "Effect of subsidies on farms' exit decision," Agribusiness, John Wiley & Sons, Ltd., vol. 39(4), pages 941-959, October.
    5. Dragos, Cristian Mihai & Dragos, Simona Laura & Mare, Codruta & Muresan, Gabriela Mihaela & Purcel, Alexandra-Anca, 2023. "Does risk assessment and specific knowledge impact crop insurance underwriting? Evidence from Romanian farmers," Economic Analysis and Policy, Elsevier, vol. 79(C), pages 343-358.
    6. Mingyu Hu & Fujin Yi & Hong Zhou & Feier Yan, 2024. "The More the Better? Reconsidering the Welfare Effect of Crop Insurance Premium Subsidy," Agriculture, MDPI, vol. 14(11), pages 1-19, November.
    7. Bauman, Allison & Jablonski, Becca B. R. & Key, Nigel D. & Hadrich, Joleen C., 2022. "Land tenure and profitability outcomes for U.S. beginning farmers and ranchers," 2022 Annual Meeting, July 31-August 2, Anaheim, California 322233, Agricultural and Applied Economics Association.
    8. Acharya H, Rajesh, 2024. "Adoption of Crop Insurance by Smallholder Farmers: Farm-Level Evidence from India," Research on World Agricultural Economy, Nan Yang Academy of Sciences Pte Ltd (NASS), vol. 5(4), October.
    9. Kim, Jiyeon & Yu, Jisang, 2024. "The Impacts of the North American Free Trade Agreement on Farm Profitability and Survival," 2024 Annual Meeting, July 28-30, New Orleans, LA 343707, Agricultural and Applied Economics Association.
    10. Martynas Rusteika & Lina Skinulienė, 2023. "Expectations of the Participants of the Crop Insurance System and Their Implementation," Agriculture, MDPI, vol. 13(3), pages 1-30, March.
    11. Doidge, Mary, 2020. "Crowding out or crowding in? The influence of subsidised crop insurance on climate change adaptation," 2020 Annual Meeting, July 26-28, Kansas City, Missouri 304369, Agricultural and Applied Economics Association.
    12. Aaron De Laporte & Daniel Schuurman & Tristan Skolrud & Peter Slade & Alfons Weersink, 2024. "Business risk management programs and the adoption of beneficial management practices in Canadian crop agriculture," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 72(3), pages 309-324, September.

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    Keywords

    Agribusiness; Agricultural and Food Policy; Risk and Uncertainty;
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