Effects of crop insurance on farm input use: Evidence from Kansas farm data. (6th August 2022)

• Record Type: Journal Article
• Authors: Regmi, Madhav; Briggeman, Brian C.; Featherstone, Allen M.
• Is Part Of: Agricultural and resource economics review. Volume 51:Number 2(2022)
• Page Start: 361
• Page End: 379
• Publication Date: 2022-08-06
• Subjects: crop insurance -- farm chemical -- matching -- moral hazard -- seed -- two-way fixed effects; Sustainable agriculture -- Periodicals; Sustainable agriculture -- United States -- Periodicals; Natural resources -- Periodicals; Agriculture -- Economic aspects -- Periodicals; Rural development -- Periodicals; 338.10974
• DOI: 10.1017/age.2022.5
• Languages: English
• ISSNs: 1068-2805

Abstract

Abstract: Crop insurance has been linked to changes in farm production decisions. In this study, we examine the effects of crop insurance participation and coverage on farm input use. Using a 1993–2016 panel of Kansas farms, evidence exists that insured farms apply more farm chemicals and seed per acre than uninsured farms. We use a fixed effects instrumental variable estimator to obtain the effects of change in crop insurance coverage on farm input use accounting farm-level heterogeneity. Empirical evidence suggests that changes in the levels of crop insurance coverage do not significantly affect farm chemical use. Thus, moral hazard effects from purchasing crop insurance are not large on a per acre basis but can lead to expenditures of $6, 100 per farm.