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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、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 |
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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.
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.
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Received: 17 February 2014
Accepted:
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| Fund: 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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Corresponding Authors:
ZHANG Qiao, Tel: +86-10-82109883, Fax: +86-10-82106261, E-mail: zhangqiao@caas.cn
E-mail: zhangqiao@caas.cn
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| About author: WANG Ke, Tel: +86-10-82106259, E-mail: wangke01@caas.cn; |
Cite this article:
WANG Ke, ZHANG Qiao, Shingo Kimura, Suraya Akter.
2015.
Is the crop insurance program effective in China? Evidence from farmers analysis in five provinces. Journal of Integrative Agriculture, 14(10): 2109-2120.
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