The Crowd-out Effect of Crop Insurance on Farm Survival and Profitability

Barrett Kirwan

No 170881, 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota from Agricultural and Applied Economics Association

Abstract: The Federal Crop Insurance program has expanded dramatically over the past two decades---from $140 million in subsidies and 84 million acres covered to nearly $10 billion in subsidies and 260 million acres covered. The effect this has had on farmers' overall risk exposure and profitability is unclear. Self-selection and market dynamics have masked the direct effect of crop insurance. This paper uses numerous changes to the crop insurance program to isolate crop insurance's direct effect on risk exposure and, ultimately, profitability. I find that crop insurance increases debt holdings and acres cash rented and decreases the use of marketing contracts. Crop insurance has no effect on farm profitability. Taken together, crop insurance crowds out other risk-management strategies without improving farm profitability.

Keywords: Agricultural and Food Policy; Agricultural Finance; Risk and Uncertainty (search for similar items in EconPapers)
Date: 2014
New Economics Papers: this item is included in nep-agr
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://ageconsearch.umn.edu/record/170881/files/AAEA2014.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea14:170881

DOI: 10.22004/ag.econ.170881

Access Statistics for this paper

More papers in 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota from Agricultural and Applied Economics Association Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search ().