Impacts of Federal Crop Insurance on Land Use and Environmental Quality

Abstract This article integrates economic and biophysical models to assess how federal crop revenue insurance programs affect land use, cropping systems, and environmental quality in the U.S. Corn Belt region. The empirical framework includes econometric models that predict land conversion and crop choices at the parcel level based on expectation and variance of crop revenues, land quality, climate conditions, and physical characteristics at each site. The predictions are then combined with site‐specific environmental production functions to determine the effect of revenue insurance on nitrate runoff and leaching, soil water and wind erosion, and carbon sequestration. Results suggest that federal crop insurance has, on average, a small effect on conversions of non‐cropland to cropland, and somewhat more significant impacts on crop choice and crop rotation. These changes in cropping systems have, on average, small impacts on agricultural pollution.