Does crop insurance lead to better environmental practices? Evidence from French farms

The purpose of this paper is to examine how crop insurance influences pesticide use, the two decisions being strategic for risk management at the farm scale. Using data from the Farm Accountancy Data Network (FADN), we consider French farms which cultivate field crops and wine-growing, the two main sectors that participate the most to crop insurance and that use intensively pesticides. The paper implements propensity score matching, difference-in-differences models and a combination of these two methods in order to compare populations of insured and non-insured farmers. The analysis is performed between 2008 and 2012 given a strategic change in the crop insurance system in 2010 that strongly incites farmers to purchase crop insurance with private companies. At the same time, pesticide use was progressively discouraged through public policies. Estimations show that while pesticide use decreases for all crops, the purchase of crop insurance policies softens this reduction for field crops and fasten it for wine-growing. These results emphasize a possible substitutability between crop insurance and pesticides as risk management tools.