Three Essays on Applied Economics: Crop Yield, Crop Insurance, and Environment
Abstract
This dissertation examines the role of ecological factors, agricultural policy, and environmental regulation in shaping crop yields, farm resilience, and social welfare in the United States. Sustaining crop yields and stabilizing farmers' incomes have become increasingly difficult amid diminishing agro-ecosystem services and extreme weather events. Current evaluations of agro-ecosystem services in relation to crop yields are mainly based on field experiments and ignore how the use of technical inputs affects these services. In addition, as extreme weather events pose a significant challenge to agricultural production and are expected to increase Federal Crop Insurance Program (FCIP) costs, the role of FCIP in the climate-yield relationship remains unclear in the U.S. Furthermore, current studies regarding the total social welfare impact of different policy interventions on the plastic market ignore the dependence of recycling firms on the used output of virgin firms. This dissertation addresses these three research gaps by conducting a national-scale analysis using improved estimation techniques and a comprehensive county-level dataset for crop yields, birds, and crop insurance in the U.S. This dissertation employs both empirical and theoretical approaches. In Chapter 1, I examine the contribution of bird biodiversity to corn and soybean yields in the presence of neonicotinoid use, quantifying the agroecosystem services provided by birds on crop yields. Using county-level panel data for breeding birds in the United States over 1997-2014, we estimate the effects of grassland bird, insectivorous bird, and endangered bird biodiversity on corn and soybean yields in the presence of neonicotinoid use. We find that the yield effects vary by bird group: grassland birds contribute positively to corn and soybean yields, insectivorous birds contribute negatively, and endangered birds show no statistically significant effect. Neonicotinoid use diminishes both the beneficial and detrimental influences of birds on crop yields. When evaluated at sample means, grassland birds contribute to 11.52% of corn yield (an economic value of $9.3 billion per year), while their contribution to soybean yield is statistically insignificant. Neonicotinoid use contributes to 3.82% of corn yield and 7.02% of soybean yield, corresponding to annual economic values of $3.1 billion and $4.1 billion, respectively. Were grassland birds to become extinct, neonicotinoid use would need to increase by 219.43% to maintain current corn yield. Conversely, if neonicotinoid use were banned, then a 32.93% increase in grassland bird population could offset the resulting reduction in corn yield. Chapter 2 investigates how the Federal Crop Insurance Program (FCIP) moderates the weather-crop yield relationship in the U.S. Furthermore, this chapter predicts heat-induced yield losses for insured and uninsured corn and soybean crops under future climate scenarios (2040-2099). I employ fixed-effects instrumental variables (FE-IV), a moment-based instrumental variables approach, and a long-difference analysis using a long panel dataset spanning 1950–2023. We find that the impact of an additional overheat GDD on corn (soybean) yield ranges from -0.47% to -0.52% (-0.57% to -0.60%), depending on the insurance participation measure used in our analysis. Moreover, a $100 increase in liability per acre of insured land is associated with a 3.38% decrease in corn yield and a 2.44% decrease in soybean yield. Our results indicate that a 1% increase in the fraction of land insured in a county is associated with a 0.079% (0.06%) decrease in corn (soybean) yields. Furthermore, using future climate scenarios (2040-2099), we find that extreme heat-induced corn losses are 2.77% to 11.20% larger for insured than for uninsured corn. For soybeans, losses are 2.92% to 11.07% larger for insured than for uninsured. Chapter 3 develops the conceptual framework to analyze the welfare effects of two forms of taxes in the U.S. plastic market—taxing virgin plastic consumers with a money-back mechanism (TCMB) and taxing virgin plastic producers (TP)—while accounting for recycling and circular economy dynamics. Our results suggest that total social welfare (TSW) remains greater under TCMB than under a producer-only (TP) policy. The return rate of used plastic to collection centers and the processing capacity of Material Recycling Facilities (MRFs) play a critical role in improving total social welfare and reducing landfill disposal. Policies that promote consumer participation to return used plastic—such as awareness campaigns and convenient return systems—along with investments in expanding MRF capacity, can significantly enhance recycling outcomes and overall welfare in the plastic market. The collective findings have important policy implications for agricultural production, environmental conservation, climate resilience, and sustainable resource management.