All Issue

2026 Vol.53, Issue 3

Management & Economics

An analysis of the production-support effects of crop insurance: Evidence from garlic and onion
Suhwan Lee1
,
Byung Min Soon2*
1Department of Food & Agriculture Economic Research, Korea Rural Economic Institute, Naju 58321, Korea
2Department of Agricultural Economics, Chungnam National University, Daejeon 34134, Korea
*Corresponding Author
1 September 2026. pp. 269-289
PDF XML Citation
Abstract

This study examines the production-support effects of crop insurance using garlic and onion as case studies. Crop insurance reduces production risks from natural disasters and stabilizes farm income, thereby influencing farmers’ production decisions. Because garlic and onion have substitution relationships in cultivation, the introduction of crop insurance for one crop may also affect the supply decisions of the other. To analyze these interactions, this study estimates acreage response functions, demand functions, and price transmission equations using annual data from 1991 to 2024. The estimated parameters are incorporated into a partial equilibrium model to simulate market outcomes under alternative policy scenarios. Three scenarios are considered: (1) no crop insurance for garlic, (2) no crop insurance for onion, and (3) no crop insurance for both crops. The results show that crop insurance contributes to stabilizing production by supporting cultivated acreage. When crop insurance is absent, acreage and production decline, leading to higher farm-gate and retail prices. The effects also spill over to substitute crops through changes in relative profitability. These findings suggest that crop insurance policies should consider substitution relationships among crops to maintain production stability and mitigate price volatility.

Keywords
crop insurance
garlic
onion
partial equilibrium model
production-support effect
References
1

Arrow KJ. 1971. Essays in the theory of risk-bearing. North-Holland Publishing Company, Netherlands.

2

Chambers RG. 1989. Insurability and moral hazard in agricultural insurance markets. American Journal of Agricultural Economics 71:604-616.

10.2307/1242016
3

Goodwin BK, Vandeveer ML, Deal JL. 2004. An empirical analysis of acreage effects of participation in the federal crop insurance program. American Journal of Agricultural Economics 86:1058-1077.

10.1111/j.0002-9092.2004.00653.x
4

Han S. 2014. An empirical analysis on the production and price effect by agricultural disaster insurance. KDI Journal of Economic Policy 36:135-169. [in Korean]

10.23895/kdijep.2014.36.4.135
5

Hennessy DA. 1998. The production effects of agricultural income support policies under uncertainty. American Journal of Agricultural Economics 80:46-57.

10.2307/3180267
6

Ji Y, Lee J. 2024. Estimation and application of damage rates of crop insurance using spatial dependency. Journal of Rural Development 47:27-54. [in Korean]

10.36464/JRD.2024.47.4.002
7

KAMIS (Korea Agro-Fisheries & Food Trade Corporation). 2026. Annual price data of farm sale price and retail price. Accessed in https://www.kamis.or.kr on 15 January 2026.

8

Kim MB, Rhew CH, Kim YJ. 2015. A study on impact analysis of crop insurance program on agricultural production. Research Report No. R751. Korea Rural Economic Institute. [in Korean]

9

Kim TH, Kim MB, Kim YJ, Chae HG, Kwon OH. 2022. Policy research for establishing the first master plan for agricultural disaster insurance (2023-2027). Research Report No. C2022-45. Korea Rural Economic Institute. [in Korean]

10

Knight FH. 1921. Risk, uncertainty and profit. Houghton Mifflin Company, Boston, MA.

11

KOSIS (Korean Statistical Information Service). 2026. Major indicators of national accounts (annual indicators). Accessed in https://kosis.kr on 15 January 2026.

12

Park J, Hong S. 2023. Korea-China FTA concession carve-out effects on garlic industry. Korean Journal of Agricultural Science 50:167-179. [in Korean]

10.7744/kjoas.20230011
13

Ramaswami B. 1993. Supply response to agricultural insurance: Risk reduction and moral hazard effects. American Journal of Agricultural Economics 75:914-925.

10.2307/1243979
14

Shi J, Wu J, Olen B. 2020. Assessing effects of federal crop insurance supply on acreage and yield of specialty crops. Canadian Journal of Agricultural Economics 68:65-82.

10.1111/cjag.12211
15

Young CE, Vandeveer ML, Schnepf RD. 2001. Production and price impacts of U.S. crop insurance programs. American Journal of Agricultural Economics 83:1196-1203.

10.1111/0002-9092.00267
16

Yu J, Smith A, Sumner DA. 2018. Effects of crop insurance premium subsidies on crop acreage. American Journal of Agricultural Economics 100:91-114.

10.1093/ajae/aax058
Information
  • Publisher :Institute of Agricultural Science, Chungnam National University
  • Publisher(Ko) :충남대학교 농업과학연구소
  • Journal Title :Korean Journal of Agricultural Science
  • Journal Title(Ko) :농업과학연구
  • Volume : 53
  • No :3
  • Pages :269-289
  • Received Date : 2026-04-27
  • Revised Date : 2026-05-29
  • Accepted Date : 2026-06-15
  • DOI :https://doi.org/10.7744/kjoas.530301
Journal Informaiton Korean Journal of Agricultural Science Korean Journal of Agricultural Science
Online Submission
  • NRF
  • KOFST
  • crossref crossmark
  • crossref cited-by
  • crossref funder-registry
  • crosscheck
  • orcid
  • open access
  • ccl
Journal Informaiton Journal Informaiton - close