Impacts of Federal Crop Insurance on Land Use and Environmental Quality

Abstract

This paper integrates economic and physical models to assess how federal crop revenue insurance programs might affect land use, cropping systems, and environmental quality in the U.S. Corn Belt region. The empirical framework includes econometric models that predict land conversion, crop choices, and crop rotations at the parcel-level based on expectation and variance of crop revenues, land quality, climate conditions, and physical characteristics at each site. The predictions are then combined with site-specific environmental production functions to determine the effect of revenue insurance on nitrate runoff and leaching, soil water and wind erosion, and carbon sequestration. Results suggest that crop insurance will have small impacts on conversions of non-cropland to cropland, and somewhat more significant impacts on crop choice. These changes in crop mix have small impacts on agricultural pollution