Crop insurance premium subsidy and irrigation water withdrawals in the western United States

Prasenjit N. Ghosh (), Ruiqing Miao and Emir Malikov
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Prasenjit N. Ghosh: University of Southern Indiana

The Geneva Papers on Risk and Insurance - Issues and Practice, 2023, vol. 48, issue 4, No 9, 968-992

Abstract: Abstract We estimate the effects of the federal crop insurance premium subsidy on freshwater withdrawals for irrigation among U.S. counties to the west of the 100th meridian. Our results indicate that a 1% increase in premium subsidy leads to a 0.446% (about 475,901 acre-feet/year) and 0.673% (about 474,026 acre-feet/year) increase in total freshwater withdrawals for irrigation and fresh surface water withdrawals for irrigation, respectively. The elasticity of total freshwater withdrawals for irrigation and fresh surface water withdrawals for irrigation with respect to revenue insurance premium subsidy is more than twice as large as those with respect to yield insurance premium subsidy. Groundwater withdrawals for irrigation are not found to be responsive to crop insurance premium subsidy. Because the elasticities are all non-negative, moral hazard should not be a dominant factor in the relationship between crop insurance subsidies and freshwater withdrawals for irrigation. Thus, exploring the causal relationship between crop insurance premium subsidy and agricultural input uses, this study underscores the unintended effect of the federal crop insurance programme on water resource sustainability in the U.S.

Keywords: Crop insurance; Freshwater; Groundwater; Irrigation; Subsidy; Surface water (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1057/s41288-021-00252-4

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