An empirical analysis of acreage effects of participation in the federal crop insurance program

The extent to which crop insurance programs have resulted in additional land being brought into production has been a topic of considerable debate. We consider multiequation structural models of acreage response, insurance participation, CRP enrollment, and input usage. Our analysis focuses on corn and soybean production in the Corn Belt and wheat and barley production in the Upper Great Plains. Our results confirm that increased participation in insurance programs provokes statistically significant acreage responses in some cases, though the response is very modest in every case. In the most extreme cases, 30 % decreases in premiums as a result of increased subsidies provoke acreage increases ranging from 0.2 % to 1.1%. A number of policy simulations involving increases in premium subsidies are considered. Key words: acreage response, crop insurance. U.S. crop insurance programs have undergone significant changes in recent years. The 1980 Federal Crop Insurance Act significantly ex-panded the program and provided large subsi-dies to encourage participation. The 1994 Cro