Effects of Crop Insurance Premium Subsidies on Crop Acreage. (11th October 2017)
- Record Type:
- Journal Article
- Title:
- Effects of Crop Insurance Premium Subsidies on Crop Acreage. (11th October 2017)
- Main Title:
- Effects of Crop Insurance Premium Subsidies on Crop Acreage
- Authors:
- Yu, Jisang
Smith, Aaron
Sumner, Daniel A. - Abstract:
- Abstract : Crop insurance premium subsidies affect patterns of crop acreage for two reasons. First, holding insurance coverage constant, premium subsidies directly increase expected profit, which encourages more acreage of insured crops (direct profit effect). Second, premium subsidies encourage farms to increase crop insurance coverage. With more insurance coverage, farms obtain more subsidies, and farm revenue becomes less variable as indemnities offset revenue shortfalls, so acreage of insured crops likely increases (indirect coverage effect). By exploiting exogenous policy changes and using approximately 180, 000 county‐crop‐year observations, we estimate the sum of these two effects of premium subsidies on the pattern of U.S. acreage across seven major field crops. We estimate that a 10% increase in the premium subsidy causes a 0.43% increase in the acreage of a crop in a county holding the premium subsidy of its competing crop constant. Taking into account the small share of premium subsidies in expected crop revenue, this subsidy impact is analogous to an own‐subsidy acreage elasticity of 1.24, which exceeds own‐price acreage elasticity estimates in the literature. One explanation for the larger acreage response to premium subsidies is that insurance causes an indirect coverage effect in addition to a direct profit effect.
- Is Part Of:
- American journal of agricultural economics. Volume 100:Number 1(2018)
- Journal:
- American journal of agricultural economics
- Issue:
- Volume 100:Number 1(2018)
- Issue Display:
- Volume 100, Issue 1 (2018)
- Year:
- 2018
- Volume:
- 100
- Issue:
- 1
- Issue Sort Value:
- 2018-0100-0001-0000
- Page Start:
- 91
- Page End:
- 114
- Publication Date:
- 2017-10-11
- Subjects:
- Crop insurance -- premium subsidies -- farm policy -- supply response -- crop acreage
Agriculture -- Economic aspects -- Periodicals
Agriculture -- Periodicals
338.105 - Journal URLs:
- http://ajae.oxfordjournals.org/ ↗
https://academic.oup.com/ajae ↗
https://onlinelibrary.wiley.com/journal/14678276 ↗
http://ukcatalogue.oup.com/ ↗ - DOI:
- 10.1093/ajae/aax058 ↗
- Languages:
- English
- ISSNs:
- 0002-9092
- Deposit Type:
- Legaldeposit
- View Content:
- Available online (eLD content is only available in our Reading Rooms) ↗
- Physical Locations:
- British Library DSC - 0820.950000
British Library DSC - BLDSS-3PM
British Library HMNTS - ELD Digital store - Ingest File:
- 17206.xml