Don’t bet the Farm on Crop Insurance Subsidies

Marc Yeterian, Céline Grislain-Letrémy and Bertrand Villeneuve

No 355337, Agricultural Economics Society (AES) 98th Annual Conference, The University of Edinburgh, Edinburgh, UK, March 18-20, 2024 from Agricultural Economics Society (AES)

Abstract: Crop insurance is one of the most important tools that farmers have to protect themselves against climate-related risks. Yet and despite being heavily subsidized, insurance uptake in France remains extremely low. The goal of this paper is twofold ; first, we explain this paradox by analyzing the heterogeneous benefits and adverse effects of taking up crop insurance, and second, we provide concrete policy recommendations to increase insurance uptake in a welfare-maximizing way. Using an original micro-level panel of 17 000 French farmers over 20 years, we first use a moments-based regression to identify the local average effects (LATE) of insurance on expected revenues and variance, before investigating the factors that might cause heterogeneity in these effects, both observables through interaction terms and unobservables through a marginal treatment effect design. We conclude that insurance subsidies have very little impact on crop insurance demand, especially for those who would benefit the most, and suggest other less costly and more efficient ways to increase insurance uptake such as information campaigns.

Keywords: Agribusiness; Environmental Economics and Policy (search for similar items in EconPapers)
Pages: 63
New Economics Papers: this item is included in nep-agr, nep-env and nep-eur
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aes024:355337

DOI: 10.22004/ag.econ.355337

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