The Demand for Crop Insurance: How Important are the Subsidies?

In 1994, some 56 years after initial authorization, the Federal crop insurance program remained characterized by low enrollment levels. Many argued for increased coverage and subsequent major pieces of legislation in 1994, and 2000 expanded the program and increased premium subsidies. Enrollment jumped, transforming the Federal crop insurance program from a minor program into one of the major pillars of support for US crop farmers, covering over 200 million acres by 1995. The quant ity of crop insurance demanded has often been ascribed to the levels of subsidies offered to producers. How important are the subsidies, and what might happen to enrollment if support for subsidies were to change? This draft shows that between 1997 and 2 002, premium subsidies appeared to induce farmers to enroll more land, but that the effect on coverage levels appears more pronounced. At the national level, it appears likely that changes in the price of crop insurance did little to alter the demand for insurance as subsidy changes did not appear to change the demand for crop insurance uniformly across either crops or locations

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 Record created 2017-04-01, last modified 2018-01-22

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