Essays on Sustainable Development and Agricultural Risk Management

Few sectors of the economy are as influential to the environment and are as susceptible to the influence of environmental changes as agriculture. This dissertation contains three chapters that examine agriculture as the primary interface at which human and nature interact. Primarily, I explore how policy support for financial risk management tools can have substantial impact on agricultural production choices via moral hazard and selection problems. While mitigating agricultural production risk, these supports also impact the environment via induced change in production choices. This dissertation contributes to U.S. agriculture policy and pollution management literature and insurance literature on moral hazard and selection problems. By examining the case of Federal Crop Insurance Program in the United States, this dissertation explores input choice changes caused by changes in government support for crop insurance. I proposed theoretical mechanism through which increasing use of financial risk management strategy can influence input decisions with risk implications, and tested these theories empirically with county-level panel data. Empirical tests showed that there were substantial decreases in irrigation investment and fertilizer application due to crop insurance offering. Policy implications on water scarcity and non-point source pollution management and on federal support to crop insurance market are discussed.