The impact of crop insurance on farm financial outcomes

We use data from the Kansas Farm Management Association to estimate impact of crop insurance liability and indemnities on farm debt. Subsidized may increase farms' financial risk through a mechanism known as “risk balancing.” Previous findings in support balancing suffer bias due unobservable characteristics simultaneity debt decisions. Employing simultaneous equations model with fixed effects, we find no statistical relationship between debt, calling into question hypothesis federal insurance. show that large indemnity payments reduce reliance short-term but leave total level unchanged.