Insurance subsidies, climate change, and innovation: Implications for crop yield resiliency

Innovation in the agricultural sector will determine our ability to reduce food insecurity and feed nine billion people by 2050. Concomitantly, most of the world’s agricultural crop production is produced under heavily subsidized insurance. Changes in food security will be largely driven by the nexus of innovation, climate change, and the policy institutions under which production agriculture operates. Subsidized insurance tends to be the policy choice in most developed countries. In the United States, crop insurance subsidies increased from 30% to 60% between 1994 and 2000, bringing about a significant increase in program participation. We use this increase as a natural experiment to empirically estimate the impact of insurance subsidies on rates of technological change and measures of yield resiliency in corn (maize) yields. Our study results indicate that, after accounting for the introduction of GM seeds and changing climate, subsidies caused a decrease in various yield resiliency measures. •Crop insurance subsidies have differential effects across the yield distribution.•Crop insurance subsidies decreases yield resiliency.•Co-insurance, where farmers share in the losses below insurance trigger levels, can be easily introduced into public insurance programs and incentivize on-farm risk mitigating measures.