Land Retirement Program Design in the Presence of Crop Insurance Subsidies

David A. Hennessy
July 2009  [09-WP 495]

The U.S. federal government implements environmental, biofuels and crop insurance programs that influence land use. They are not well integrated in that cost savings from crop insurance subsidies are not acknowledged when screening land for retirement or when calculating the cost of land retirement programs. We identify and evaluate an optimal benefit index for enrollment in a land retirement program that includes a sub-index to rank land according to insurance subsidy savings. All else equal, land ranked higher in the Lorenz stochastic order should be retired first.

Keywords: agro-environmental policy, budget, Conservation Reserve Program, crop failure, Environmental Benefit Index, Lorenz order.

JEL classification: Q18, Q28

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