Supply and Effects of Specialty Crop Insurance

Ethan Ligon

No 16709, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The federal government has developed a large number of programs to insure various "specialty crops" over the last two decades; a given program is peculiar to a particular county and crop. This development has been particularly notable in California, because of its size and the diversity of crops produced there. If the extension of federal crop insurance programs to cover fruit and vegetable production has affected either producer or consumer welfare, then we would expect to see this reflected in output and prices. Exploiting variation in the timing of program introduction in different locations for different crops to estimate the effect of crop insurance on the output and prices of the insured crops. We find that the supply of and demand for insurance for tree crops is much larger than for non-tree crops. Crop insurance has a small but significant negative effect on prices of insured crops. This last finding is consistent with the view that demand for such highly disaggregated commodities is likely to be highly elastic. A consequence is that crop insurance for these specialty crops has little benefit for consumers, even when it generates a large supply response.

JEL-codes: D2 Q12 (search for similar items in EconPapers)
Date: 2011-01
New Economics Papers: this item is included in nep-agr and nep-ias
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Published as Supply and Effects of Specialty Crop Insurance , Ethan Ligon. in The Intended and Unintended Effects of US Agricultural and Biotechnology Policies , Graff Zivin and Perloff. 2012

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Chapter: Supply and Effects of Specialty Crop Insurance (2011)
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