Supply and Effects of Specialty Crop Insurance

33 Pages Posted: 19 Jan 2011 Last revised: 27 Feb 2021

See all articles by Ethan A. Ligon

Ethan A. Ligon

University of California, Berkeley; Giannini Foundation

Date Written: January 2011

Abstract

The federal government has developed a large number of programs to insure various "specialty crops" over the last two decades; a given program is peculiar to a particular county and crop. This development has been particularly notable in California, because of its size and the diversity of crops produced there.If the extension of federal crop insurance programs to cover fruit and vegetable production has affected either producer or consumer welfare, then we would expect to see this reflected in output and prices. Exploiting variation in the timing of program introduction in different locations for different crops to estimate the effect of crop insurance on the output and prices of the insured crops.We find that the supply of and demand for insurance for tree crops is much larger than for non-tree crops. Crop insurance has a small but significant negative effect on prices of insured crops. This last finding is consistent with the view that demand for such highly disaggregated commodities is likely to be highly elastic. A consequence is that crop insurance for these specialty crops has little benefit for consumers, even when it generates a large supply response.

Suggested Citation

Ligon, Ethan A., Supply and Effects of Specialty Crop Insurance (January 2011). NBER Working Paper No. w16709, Available at SSRN: https://ssrn.com/abstract=1743326

Ethan A. Ligon (Contact Author)

University of California, Berkeley ( email )

207 Giannini Hall #3310
Berkeley, CA 94720-3310
United States

Giannini Foundation

UC Davis
Davis, CA 95616
United States

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