Evaluating Farm-Level Crop Insurance Demand in China: A Double-Bounded Dichotomous Approach

Ruojin Zhang, Dan Fan

Abstract


In 2007 the Chinese Ministry of Finance (CMF) approved the pilot agricultural insurance subsidy program, which tremendously promoted the growth of the agricultural insurance market. However the insurance adoption rate is still low comparing to that of developed countries. The main objective of this paper is to investigate factors most influence growers’ crop insurance adoption decisions. To this end, we adopt a double-bounded dichotomous choice (DBDC) experiment. This bidding experiment is conducted through extensive in-person interviews with over 300 rural households in west China, Szechwan province. By using the maximize likelihood method we empirically estimate the effects of factors such as landholding, income and farming experience on the farm-level crop insurance demand. Results indicate that the majority (53 per cent) of rice growers are willing to pay a high crop insurance premium above ¥10 ($ 1.7). On the other side, about 23 per cent of growers value the crop insurance below ¥2 ($ 0.34). As expected, the effects of landholding, education and income are all positive and statistically significant. However, household size and farming experience adversely affect the insurance adoption decisions.


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DOI: https://doi.org/10.5539/jas.v8n3p10

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