Government Insurance Program Design, Incentive Effects, and Technology Adoption: The Case of Skip-Row Crop Insurance

Can the availability of poorly-designed government insurance alter technology adoption decisions? A theoretical model of technology adoption and insurance incentive effects for a high- and low-risk technology is developed and explored empirically using a unique dataset of skip-row agronomic trial data. A multivariate nonparametric resampling technique is developed, which augments the trial data with a larger dataset of conventional yields to improve estimation efficiency. Skip-row adoption is found to increase mean yields and reduce risk in areas prone to drought. RMA insurance rules have incentive-distorting impacts which disincentivize skip-row adoption. Copyright 2012, Oxford University Press.