The Effects of Crop Insurance Subsidies and Sodsaver on Land-Use Change

Ruiqing Miao, David Hennessy and Hongli Feng

ISU General Staff Papers from Iowa State University, Department of Economics

Abstract: It is well known that insurance market information asymmetry can cause socially excessive cropping of yield-risky land. We show that crop insurance subsidies can cause the same problem absent information failures. Using field-level yield data, we find an inversed U-shaped relationship between crop prices and crop insurance subsidies’ land-use impacts. For seventeen counties in the U.S. Prairie Pothole Region, simulations show that 0.05% to 3.3% (about 2,600 to 157,900 acres) of land under crop insurance would not have been converted from grassland had premium subsidies not existed. Land-use impacts of Sodsaver in the 2014 Farm Act are also quantified.

Date: 2016-05-01
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Related works:
Journal Article: The Effects of Crop Insurance Subsidies and Sodsaver on Land-Use Change (2016)
Working Paper: Effects of Crop Insurance Subsidies and Sodsaver on Land Use Change, The (2012)
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