The empirical relationship between federally-subsidized crop insurance and soil erosion

by Deal, John L.

DEAL, JOHN L. The Empirical Relationship Between Federally-Subsidized Crop Insurance and Soil Erosion. (Under the direction of Duncan M. Holthausen and Barry K. Goodwin). This study examines the impact of federally-subsidized crop insurance and government program payments on soil erosion. Specifically, this study analyzes the impact of those programs on production decisions, such as acreage allocation and input use, and the resulting impact on soil erosion. The first essay investigates the “conventional wisdom” that economically marginal land is also environmentally fragile (i.e., highly erodible). We address this issue by looking at the distribution of crop yields across erodibility classes and by performing regression analysis. Our results indicate that land with higher levels of soil erodibility exhibit lower mean crop yields, a proxy for economic marginality, which lends support to the conventional wisdom. The second essay investigates the impact of federallysubsidized crop insurance on acreage allocation and input use in the primary cotton growing regions in the United States. Using county-level data from the 1990-1995 and 1996-2000 time periods, we find that the acreage response to insurance participation, though statistically significant, is quite inelastic. The results of simulations that we conducted indicate that large premium rate reductions would generate significant changes in insurance participation, but those changes would not result in large changes in planted acreage. The third essay investigates the relationship between specific government agricultural programs and soil erosion. Using county-level data from the years 1992 and 1997, we estimate a model of soil erosion and crop insurance participation. We find that crop insurance participation and conservation payments are significantly associated with county average soil erosion levels, while other program payments, e.g., deficiency and AMTA payments, exhibit no statistically significant association with our soil erosion measure. The Empirical Relationship Between Federally-Subsidized Crop Insurance and Soil Erosion by John L. Deal A dissertation submitted to the Graduate Faculty of North Carolina State University in partial satisfaction of the requirements for the Degree of Doctor of Philosophy Department of Economics Raleigh 2004 Approved By: Dr. Nicholas E. Piggott Dr. Daniel J. Phaneuf Dr. Duncan M. Holthausen Co-chair of Advisory Committee Dr. Barry K. Goodwin Co-chair of Advisory Committee To my mother Nora Jenkins ii iii Biography John Deal was born on September 19, 1955 to Luther and Nora Deal in Statesville, North Carolina. After graduating from South Iredell High School in 1974, John began attending UNC-Charlotte in the fall of 1974. He received a Bachelor of Science degree in Political Science in May of 1979. Having received his degree, John spent the next fifteen years working in the food service industry. After deciding to return to school, he completed the course requirements for a M.S. degree in economics from UNC-Charlotte. He then enrolled in the Ph.D. program at N.C. State University in 1997. iv