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

作  者:
Wang Ke;Zhang Qiao;Kimura, Shingo;Akter, Suraya
单  位:
Minist Agr, Key Lab Agriinformat Serv Technol, Beijing 100081, Peoples R China;Chinese Acad Agr Sci, Agr Informat Inst, Beijing 100081, Peoples R China;Org Econ Cooperat & Dev, Trade & Agr Directorate, F-75775 Paris, France
关键词:
crop insurance;effectiveness evaluation;expected utility model;China
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.
作  者:
WANG Ke;ZHANG Qiao;Shingo Kimura;Suraya Akte;Agricultural Information Institute, Chinese Academy of Agricultural Sciences;Key Laboratory of Agri-information Service Technology, Ministry of Agriculture;Trade and Agricultural Directorate, Organization for Economic Cooperation and Development;
关键词:
crop insurance,effectiveness evaluation,expected utility model,China
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.

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