American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Federal Crop Insurance and the Disincentive to Adapt to Extreme Heat
American Economic Review
vol. 105,
no. 5, May 2015
(pp. 262–66)
Abstract
Despite significant progress in average yields, the sensitivity of corn and soybean yields to extreme heat has remained relatively constant over time. We combine county-level corn and soybeans yields in the United States from 1989-2013 with the fraction of the planting area that is insured under the federal crop insurance program, which expanded greatly over this time period as premium subsidies increased from 20 percent to 60 percent. Insured corn and soybeans are significantly more sensitive to extreme heat that uninsured crops. Insured farmers do not have the incentive to engage in costly adaptation as insurance compensates them for potential losses.Citation
Annan, Francis, and Wolfram Schlenker. 2015. "Federal Crop Insurance and the Disincentive to Adapt to Extreme Heat." American Economic Review, 105 (5): 262–66. DOI: 10.1257/aer.p20151031Additional Materials
JEL Classification
- G22 Insurance; Insurance Companies; Actuarial Studies
- Q12 Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
- Q14 Agricultural Finance
- Q18 Agricultural Policy; Food Policy
- Q54 Climate; Natural Disasters and Their Management; Global Warming