The role of interstate trade and crop insurance programs on the U.S. agriculture’s capacity to adapt to climate change

Abstract

This dissertation presents three essays related to the economics of agricultural policies and climate change. The first essay discusses the relationship between interstate trade and the mitigation of native impacts caused by increasing frequency of severe droughts due to climate change. I combine two commonly used reduced form models: gravity equation and Ricardian analysis to study how drought will affect the domestic trade flow, and further change local agricultural profit. I find that interstate trade, to a large extent, can mitigate the adverse impact of increasing droughts towards U.S. agriculture. The second essay studies the potential impacts of federal crop insurance program on farmers’ adaptation behavior. I extend the standard Ricardian framework to incorporate crop insurance. This extended Ricardian framework allows me to generate theoretical predictions on the changes in marginal effects of climate variable due to crop insurance. The empirical study using the most recent agricultural census data confirms the theoretical model. The third essay focuses on the misrating phenomenon in the federal crop insurance program (FCIP). This essay is the first attempt in the literature to formally quantify the scale of misrating issue, to study the spatial pattern of misrating status and to evaluate the fiscal impact of correcting the misrating in the program. The results suggest that the misrating is a large-scale phenomenon in FCIP, the misrating status possess a strong positive spatial autocorrelation pattern, and the correcting misrating can reduce the total outlay of the program but under very strict elasticity conditions for the demand of crop insurance.U of I OnlyAuthor requested U of Illinois access only (OA after 2yrs) in Vireo ETD syste