Agricultural Insurance and Soil Depletion in a Simple Dynamic Model

Robert Innes () and Sergio Ardila

American Journal of Agricultural Economics, 1994, vol. 76, issue 3, 371-384

Abstract: We study the effects of agricultural insurance on farm production choices, soil depletion and the environment when there are two related risks, one in short-to-medium run production revenues and the other in land value. The analysis considers "pure" and "truncating" insurance programs that stabilize linear combinations of short-run revenue risk and land price risk. Production-revenue-stabilizing insurance is often found to elicit increased farmer output, thus exacerbating environmental externalities and causing further soil depletion. Land-value-stabilizing insurance typically elicits lower output thus mitigating environmental externalities and pushing farmers closer to their complete-insurance output levels.

Date: 1994
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Persistent link: https://EconPapers.repec.org/RePEc:oup:ajagec:v:76:y:1994:i:3:p:371-384.

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