Federal Crop Insurance and the Disincentive to Adapt to Extreme Heat
Francis Annan, Wolfram Schlenker
American Economic Review · 2015 · Volume 105 · Issue 5
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.
Keywords
Insurance, Insurance Companies, Actuarial Studies, Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets, Agricultural Finance, Agricultural Policy, Food Policy, Climate, Natural Disasters and Their Management, Global Warming
Enable JavaScript for citation tools and additional paper interactions.