Influence of farm size and insured type on crop insurance returns. Issue 3 (18th February 2020)

• Record Type: Journal Article
• Authors: Sharma, Sankalp; Walters, Cory G.
• Is Part Of: Agribusiness. Volume 36:Issue 3(2020)
• Page Start: 440
• Page End: 452
• Publication Date: 2020-02-18
• Subjects: agricultural policy -- crop insurance; Agriculture -- Economic aspects -- Periodicals; Agriculture -- Finance -- Periodicals; Agricultural industries -- Periodicals; Agriculture -- Economic aspects -- United States -- Periodicals; Agriculture -- United States -- Finance -- Periodicals; Agricultural industries -- United States -- Periodicals; 338.1
• DOI: 10.1002/agr.21636
• Languages: English
• ISSNs: 0742-4477

Abstract

Abstract: In this article, we empirically examine the impact of farm size and insured type on returns from crop insurance participation in four regions using unit‐level crop insurance contract data. Our quasi‐panel empirical model provides guidance on whether larger producers are riskier than smaller producers and whether cash producers are riskier than landlords. In our sample, we did not find evidence that large producers obtain higher returns from insurance participation than their smaller counterparts. In fact, we found evidence of the opposite that larger producers in Iowa and Nebraska receive less than their smaller counterparts. Our farm size results suggest that any legislation limiting crop insurance participation from large producers would negatively influence the insurance pool, driving up premiums and consequently administrative and operational subsidies and per‐acre premium subsidy dollars. We did find evidence that cash insured types get more back in insurance than landlords in both Montana and Oklahoma, suggesting the possibility of moral hazard in input usage. Our results also highlight spatial differences in crop insurance outcomes.