The Environmental Impacts of Subsidized Crop Insurance: Crop Insurance & the Extensive Margin
نویسندگان
چکیده
A partial equilibrium model of stochastic crop production is used to analyze the impacts of subsidized crop insurance on the extensive margin of agricultural production. It is shown that land use is unchanged only when an actuarially fair, perfectly separating insurance contract is offered. For actuarially fair, pooling equilibrium contracts, however, land with a minimum quality that is strictly lower than the minimum quality without insurance will be added to production. Premium subsidies, regardless of equilibrium type, create further incentives for expansion of the extensive margin. Implications for the environment are discussed. The Environmental Impacts of Subsidized Crop Insurance
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