Effects of Crop Insurance on Farm Disinvestment and Exit Decisions

• Agricultural Economics Workshop

Date and Location

Thursday, October 18, 2018, 4:10 PM - 5:30 PM
ARE Library Conference Room, 4101 Social Sciences and Humanities

Abstract

Over the last two decades, the U.S. federal crop insurance program expanded rapidly. Despite growing importance of crop insurance programs, little is known about the relationship between crop insurance and disinvestment and exit decisions of farms. Using a farm-level panel dataset, we parametrically and semi-parametrically estimate the effects of crop insurance on the likelihood of farm disinvestment and farm exits with carefully developed identification strategies. Our estimation results from a dynamic panel model and from the Cox proportional hazard model with propensity score matching indicate that a) crop insurance lowers the likelihood of farm disinvestment and b) reduces the likelihood of farm exits. The positive and significant effects of crop insurance on farm survival remain robust across different specifications.