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High liabilities or heavy subsidies

Author

Listed:
  • Tao Ye
  • Ming Wang
  • Wuyang Hu
  • Yangbin Liu
  • Peijun Shi

Abstract

Purpose - Understanding farmers’ preferences for crop insurance attributes is crucial in designing better insurance products and guiding government policies but such research is lacking, particularly in developing countries. The paper aims to discuss these issues. Design/methodology/approach - This study uses a survey featuring a discrete choice experiment and policy simulation. Findings - Overall, crop insurance has positive values to farmers, although preference is heterogeneous based on socioeconomic characteristics and risk position. Policy simulation confirms the roles of liability in strengthening insurance participants’ welfare and premium subsidy in encouraging participation. Introducing one more product into the market can accommodate farmers’ diverse needs and lead to increases in both aggregated social welfare and participation while maintaining the current level of government expense in subsidy – a potential Pareto improvement. Research limitations/implications - Methodology employed is not the most novel in the choice experiment literature as many of the advances in choice experiment design could not be applied due to the actual condition in rural China and Chinese farmers’ capability in understanding the experiment. Practical implications - The results indicate that the current single-product market structure using “low liability with high premium subsidies” cannot accommodate the diverse needs among farmers. Providing more varieties of liability-subsidy combinations, e.g. a high liability with low premium subsidy insurance product, can substantially improve participants’ welfare with little impact to the probability of participation. Originality/value - The authors believe that this is one of the very few studies that that analyze farmers’ preferences and willingness to pay for the attributes of crop insurance products. It also shows how crop insurance product design can build upon farmers’ choices to achieve a potential Pareto improvement in aggregated social welfare in the context of a fast-developing crop insurance market.

Suggested Citation

  • Tao Ye & Ming Wang & Wuyang Hu & Yangbin Liu & Peijun Shi, 2017. "High liabilities or heavy subsidies," China Agricultural Economic Review, Emerald Group Publishing Limited, vol. 9(4), pages 588-606, November.
  • Handle: RePEc:eme:caerpp:caer-06-2016-0093
    DOI: 10.1108/CAER-06-2016-0093
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    Citations

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    Cited by:

    1. Yingmei Tang & Huifang Cai & Rongmao Liu, 2022. "Will marketing strategies affect farmers’ preferences and willingness to pay for catastrophe insurance? Evidence from a choice experiment in China," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 24(1), pages 1376-1389, January.
    2. H. Holly Wang & Lu Liu & David L. Ortega & Yu Jiang & Qiujie Zheng, 2020. "Are smallholder farmers willing to pay for different types of crop insurance? An application of labelled choice experiments to Chinese corn growers," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 45(1), pages 86-110, January.
    3. Filiptseva, Anna & Filler, Günther & Odening, Martin, 2022. "Compensation Options for Quarantine Costs in Plant Production," 62nd Annual Conference, Stuttgart, Germany, September 7-9, 2022 329595, German Association of Agricultural Economists (GEWISOLA).
    4. Ding, Ye & Nayga Jr, Rodolfo M. & Zeng, Yinchu & Yang, Wei & Arielle Snell, Heather, 2022. "Consumers’ valuation of a live video feed in restaurant kitchens for online food delivery service," Food Policy, Elsevier, vol. 112(C).
    5. Ranjan Kumar Ghosh & Shweta Gupta & Vartika Singh & Patrick S. Ward, 2021. "Demand for Crop Insurance in Developing Countries: New Evidence from India," Journal of Agricultural Economics, Wiley Blackwell, vol. 72(1), pages 293-320, February.

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