Journal of Integrative Agriculture ›› 2015, Vol. 14 ›› Issue (10): 2109-2120.DOI: 10.1016/S2095-3119(14)60842-X

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Is the crop insurance program effective in China? Evidence from farmers analysis in five provinces

 WANG  Ke, ZHANG  Qiao, Shingo  Kimura, Suraya  Akter   

  1. 1、Agricultural Information Institute, Chinese Academy of Agricultural Sciences, Beijing 100081, P.R.China
    2、Key Laboratory of Agri-information Service Technology, Ministry of Agriculture, Beijing 100081, P.R.China
    3、Trade and Agricultural Directorate, Organization for Economic Cooperation and Development, Paris 75775, France
  • 收稿日期:2014-02-17 出版日期:2015-10-09 发布日期:2015-10-12
  • 通讯作者: ZHANG Qiao, Tel: +86-10-82109883, Fax: +86-10-82106261, E-mail: zhangqiao@caas.cn
  • 作者简介:WANG Ke, Tel: +86-10-82106259, E-mail: wangke01@caas.cn;
  • 基金资助:

    The authors acknowledge the National Science & Technology Pillar Program during the 12th Five-year Plan period (2014BAL07B03-02) and Agricultural Risk Management Projet Cooperated with Organization for Economic Co-operation and Development (OECD).

Is the crop insurance program effective in China? Evidence from farmers analysis in five provinces

 WANG  Ke, ZHANG  Qiao, Shingo  Kimura, Suraya  Akter   

  1. 1、Agricultural Information Institute, Chinese Academy of Agricultural Sciences, Beijing 100081, P.R.China
    2、Key Laboratory of Agri-information Service Technology, Ministry of Agriculture, Beijing 100081, P.R.China
    3、Trade and Agricultural Directorate, Organization for Economic Cooperation and Development, Paris 75775, France
  • Received:2014-02-17 Online:2015-10-09 Published:2015-10-12
  • Contact: ZHANG Qiao, Tel: +86-10-82109883, Fax: +86-10-82106261, E-mail: zhangqiao@caas.cn
  • About author:WANG Ke, Tel: +86-10-82106259, E-mail: wangke01@caas.cn;
  • Supported by:

    The authors acknowledge the National Science & Technology Pillar Program during the 12th Five-year Plan period (2014BAL07B03-02) and Agricultural Risk Management Projet Cooperated with Organization for Economic Co-operation and Development (OECD).

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摘要： This paper aims to evaluate the effectiveness of the Chinese crop insurance program in terms of farmers’ utility and welfare. A simulation model based on the power utility function was first developed to evaluate the effectiveness of crop insurance. Then, the Monte Carlo approach was used to generate the datasets of area, price, yield, cost, and income based on the characteristics of representative farmers, which were clustered and calibrated using the farm-level data of 574 individual farmers from five Chinese provinces. Finally, the effectiveness of Chinese crop insurance was evaluated by comparing the certainty equivalence (CE) of farmers’ utility/welfare under alternative crop insurance scenarios. Government subsidy is a necessary premise for implementing the crop insurance program. The government should subsidize more than 50% of the crop insurance premium to motivate more farmers to participate in the program. The findings also show that the current crop insurance program in China has increased the farmers’ welfare but still need to be improved to achieve the Pareto improvement and to make full use of the financial fund of the government. This paper is believed to not only extend academic research but also has significant implications for policymakers, especially in the context of rapid development of Chinese crop insurance with much issues such as rate, subsidy and coverage level needed to be improved.

关键词: crop insurance , effectiveness evaluation , expected utility model , China

Abstract: This paper aims to evaluate the effectiveness of the Chinese crop insurance program in terms of farmers’ utility and welfare. A simulation model based on the power utility function was first developed to evaluate the effectiveness of crop insurance. Then, the Monte Carlo approach was used to generate the datasets of area, price, yield, cost, and income based on the characteristics of representative farmers, which were clustered and calibrated using the farm-level data of 574 individual farmers from five Chinese provinces. Finally, the effectiveness of Chinese crop insurance was evaluated by comparing the certainty equivalence (CE) of farmers’ utility/welfare under alternative crop insurance scenarios. Government subsidy is a necessary premise for implementing the crop insurance program. The government should subsidize more than 50% of the crop insurance premium to motivate more farmers to participate in the program. The findings also show that the current crop insurance program in China has increased the farmers’ welfare but still need to be improved to achieve the Pareto improvement and to make full use of the financial fund of the government. This paper is believed to not only extend academic research but also has significant implications for policymakers, especially in the context of rapid development of Chinese crop insurance with much issues such as rate, subsidy and coverage level needed to be improved.

Key words: crop insurance , effectiveness evaluation , expected utility model , China