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The Effects of Crop Insurance Subsidies and Sodsaver on Land-Use Change

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  • Miao, Ruiqing
  • Hennessy, David A.
  • Feng, Hongli

Abstract

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.

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  • Miao, Ruiqing & Hennessy, David A. & Feng, Hongli, 2016. "The Effects of Crop Insurance Subsidies and Sodsaver on Land-Use Change," ISU General Staff Papers 201605010700001803, Iowa State University, Department of Economics.
    • Handle: RePEc:isu:genstf:201605010700001803
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    Cited by:

    1. Doidge, Mary & Feng, Hongli & Hennessy, David A., 2018. "Farmers’ valuation of changes to crop insurance coverage level – a test of third generation prospect theory," 2018 Annual Meeting, August 5-7, Washington, D.C. 274478, Agricultural and Applied Economics Association.
    2. Gohin, Alex, 2017. "Macroeconomic impacts of the U.S. farm policy: a second best assessment," Conference papers 332819, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    3. Lee, Chien-Chiang & Zeng, Mingli & Luo, Kang, 2023. "Food security and digital economy in China: A pathway towards sustainable development," Economic Analysis and Policy, Elsevier, vol. 78(C), pages 1106-1125.
    4. Jisang Yu & Nathan P. Hendricks, 2020. "Input Use Decisions with Greater Information on Crop Conditions: Implications for Insurance Moral Hazard and the Environment," American Journal of Agricultural Economics, John Wiley & Sons, vol. 102(3), pages 826-845, May.
    5. Wang, Tong & Luri, Moses & Janssen, Larry & Hennessy, David A. & Feng, Hongli & Wimberly, Michael C. & Arora, Gaurav, 2017. "Determinants of Motives for Land Use Decisions at the Margins of the Corn Belt," Ecological Economics, Elsevier, vol. 134(C), pages 227-237.
    6. Anton Bekkerman, 2021. "Quality forecasts: Predicting when and how much markets value higher‐protein wheat," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 69(4), pages 465-490, December.
    7. Miao, Ruiqing & Khanna, Madhu, 2017. "Costs of meeting a cellulosic biofuel mandate with perennial energy crops: Implications for policy," Energy Economics, Elsevier, vol. 64(C), pages 321-334.
    8. Traci Bruckner, 2016. "Agricultural Subsidies and Farm Consolidation," American Journal of Economics and Sociology, Wiley Blackwell, vol. 75(3), pages 623-648, May.
    9. Möhring, Niklas & Dalhaus, Tobias & Enjolras, Geoffroy & Finger, Robert, 2020. "Crop insurance and pesticide use in European agriculture," Agricultural Systems, Elsevier, vol. 184(C).
    10. Bekkerman, Anton, 2017. "Quality Forecasts: Predicting When and How Much Markets Value Higher Protein Wheat," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 259119, Agricultural and Applied Economics Association.
    11. Lark, Tyler J., 2020. "Protecting our prairies: Research and policy actions for conserving America’s grasslands," Land Use Policy, Elsevier, vol. 97(C).
    12. Chemeris, Anna & Liu, Yong & Ker, Alan P., 2022. "Insurance subsidies, climate change, and innovation: Implications for crop yield resiliency," Food Policy, Elsevier, vol. 108(C).
    13. Alexandre Gohin, 2019. "General Equilibrium Modelling of the Insurance Industry: U.S. Crop Insurance," Journal of Global Economic Analysis, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University, vol. 4(2), pages 108-145, December.
    14. Gohin, Alexandre, 2018. "Lessons from the U.S. risk management instruments for the future CAP," 162nd Seminar, April 26-27, 2018, Budapest, Hungary 271965, European Association of Agricultural Economists.
    15. Miao, Ruiqing & Khanna, Madhu, 2015. "Costs of Meeting the Cellulosic Biofuel Mandate with an Energy Crop with Establishment Cost and Yield Risk: Implications for Policy," 2015 Conference, August 9-14, 2015, Milan, Italy 212458, International Association of Agricultural Economists.
    16. Winters-Michaud, Clayton P. & Haro, Alfredo & Callahan, Scott & Bigelow, Daniel P., 2024. "Major Uses of Land in the United States, 2017," Economic Information Bulletin 345316, United States Department of Agriculture, Economic Research Service.
    17. 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.
    18. Wang, Tong & Luri, Moses & Janssen, Larry & Hennessy, David & Feng, Hongli & Wimberly, Michael & Arora, Gaurav, 2016. "Farmers’ Rankings of the Determinants of Land Use Decisions at the Margins of the Corn Belt," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235109, Agricultural and Applied Economics Association.
    19. Yu Xiao & Caiyan Yang & Lu Zhang, 2024. "The Impact of a Full-Cost Insurance Policy on Fertilizer Reduction and Efficiency: The Case of China," Agriculture, MDPI, vol. 14(9), pages 1-18, September.
    20. Sweikert, Lily A. & Gigliotti, Larry M., 2019. "Evaluating the role of Farm Bill conservation program participation in conserving America’s grasslands," Land Use Policy, Elsevier, vol. 81(C), pages 392-399.
    21. Jisang Yu & Daniel A. Sumner, 2018. "Effects of subsidized crop insurance on crop choices," Agricultural Economics, International Association of Agricultural Economists, vol. 49(4), pages 533-545, July.
    22. Miao, Ruiqing & Khanna, Madhu, 2013. "Crop Insurance for Energy Grasses," 2013 AAEA: Crop Insurance and the Farm Bill Symposium 156936, Agricultural and Applied Economics Association.
    23. Lan Yao & Xiaobo Yan & Miaomiao Xu & Mengya Wu & Zhenning Yu & Min Li, 2021. "Study on Herders’ Willingness to Protect Grassland Based on the IAD Extended Decision Model," Land, MDPI, vol. 10(4), pages 1-16, April.
    24. Kun Song & Yu Tang & Dungang Zang & Hua Guo & Wenting Kong, 2022. "Does Digital Finance Increase Relatively Large-Scale Farmers’ Agricultural Income through the Allocation of Production Factors? Evidence from China," Agriculture, MDPI, vol. 12(11), pages 1-15, November.
    25. Prasenjit N. Ghosh & Ruiqing Miao & Emir Malikov, 2023. "Crop insurance premium subsidy and irrigation water withdrawals in the western United States," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 48(4), pages 968-992, October.

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