Public Crop Insurance For Developing Countries: The Lessons From the Japanese Experiment

In view of the overwhelming impact of agricultural risks on peasant economies, many governments have traditionally adopted various measures, often in an ad hoc manner, to help farmers partially meet the losses due to natural hazards. These measures often take the form of reduction of land rent and taxes, cancellation or postponement of loan repayments, and direct subsidies. There are several disadvantages with this practice. An important one is that farmers cannot expect assistance as a right, but only as a privilege, and as a consequence cannot take these possibilities fully into consideration in determining their courses of action (for example, choice of farming techniques or use of agricultural credit). Certainly, in the case of Japan, tenancy disputes over the rent reduction on the part of landlords during the depression years brought the final pressure on the government leading to the introduction of public crop insurance in 1939 (Yamauchi, p. 14-15). The advantages of all-risk crop insurance over these ad hoc measures on various aspects of the farm economy (innovative cultivating methods, credit, and overall stability) have been discussed in the literature (Bardhan; and Wharton).