The Environmental Impacts of Subsidized Crop Insurance

Jeffrey LaFrance (), Jay Shimshack and Steven Y. Wu

No 25082, CUDARE Working Papers from University of California, Berkeley, Department of Agricultural and Resource Economics

Abstract: A partial equilibrium model of stochastic crop production is used to analyze the environmental impacts of popular subsidized crop insurance programs. Land use is unchanged only when an actuarially fair, perfectly separating insurance contract is offered. For the more typical pooling equilibrium contracts, however, land with a minimum quality that is strictly lower than the minimum quality without insurance will be added to production. In such cases, the environment will be adversely effected. If economically marginal land is also environmentally marginal, pooling crop insurance policies disproportionately contribute to the degradation of the environment. Popular subsidies merely exacerbate the problem.

Keywords: Environmental Economics and Policy; Risk and Uncertainty (search for similar items in EconPapers)
Pages: 22
Date: 2001
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Working Paper: The Environmental Impacts of Subsidized Crop Insurance (2001)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:ucbecw:25082

DOI: 10.22004/ag.econ.25082

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