Innovation Induced Volatility: 65 Years of Increasing and Asymmetric Crop Yield Volatility in the U.S. Corn Belt

• Agricultural Economics Workshop

Date and Location

Thursday, November 30, 2017, 4:10 PM - 5:30 PM
ARE Library Conference Room, 4101 Social Sciences and Humanities

Abstract

How has the interannual volatility of crop yields changed over time? We examine corn and soybean yields in the U.S. Corn Belt over the past 65 years. Volatility increased dramatically during this period, but perhaps more interestingly, the increase in volatility was asymmetric: the lower tail has gotten considerably longer, suggesting increasing levels of risk over time. Between 25-30 percent of the spatial variation in yield volatility can be explained by observed changes in climate, the remainder attributable to innovation. We posit crop insurance and moral hazard in the propagation of seed technology may be the mechanism underlying these changes.