Hemp Cultivation and Crop Diversification: Implications for Ecosystem Services in Kentucky

This study examines the ecosystem benefits of expanding hemp cultivation by assessing its impact on crop diversity. Using scenario‐based simulations and fixed‐effect panel regressions with county‐level data in Kentucky, we find that increased hemp acreage tends to enhance crop diversity, improving water quality and bird diversity. While agricultural policies aimed at small‐scale farmers align with improving farm profitability, broader ecological benefits may remain limited unless they reach a sufficient scale. Our findings suggest that hemp‐induced crop diversification can generate measurable non‐market economic benefits through improvements in water quality and bird diversity, highlighting the need for practical and proactive policy measures that promote smallholder participation.