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Assessing effects of federal crop insurance supply on acreage and yield of specialty crops
Author(s) -
Shi Jian,
Wu JunJie,
Olen Beau
Publication year - 2020
Publication title -
canadian journal of agricultural economics/revue canadienne d'agroeconomie
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.505
H-Index - 37
eISSN - 1744-7976
pISSN - 0008-3976
DOI - 10.1111/cjag.12211
Subject(s) - crop insurance , yield (engineering) , moral hazard , specialty , adverse selection , crop , agricultural economics , crop yield , economics , agricultural science , business , incentive , agriculture , environmental science , agronomy , forestry , actuarial science , geography , ecology , microeconomics , biology , medicine , materials science , pathology , metallurgy
Crop insurance may affect harvested acreage and yield by influencing producers’ behavior such as land allocation and input use. Although specialty crops are a major source of farm income, especially on the U.S. west coast, they have not received as much attention as field crops in previous empirical studies. This paper assesses the effect of moral hazard and adverse selection associated with the federal crop insurance program (FCIP) on the acreage and yield of major specialty crops in California. An econometric method that expands the switching regression model is developed to assess the effect. Results suggest that federal crop insurance can change specialty crop growers’ production responses to climate and soil conditions. The moral hazard effect tends to increase the acreage and yield of the specialty crops, whereas the adverse selection effect tends to have the opposite effect. The overall effect of the FCIP on acreage and yield of specialty crops is found to be moderate.