Determinants of agricultural household demand for insurance in China from 2004 to 2007

Abstract

Purpose The purpose of this paper is to examine the relationship between the purchase of insurance and economic growth among agricultural households. Design/methodology/approach Using survey data of the agricultural sector obtained from China over two years, the authors highlight the effect of job switching between farm and non-farm activities on the demand for insurance by applying the difference-in-differences and triple differences methodologies. Findings The results show that compared with farm income, non-farm income is associated with an increased (decreased) demand for insurance among households in Eastern (Western) China. The inequality in degree of economic development between the regions plays an important role in this finding. Both education and income exhibit a positive relationship with insurance demand for most regions. In addition, in 2007, regardless of farm or non-farm sector, switches are (except in the northeast region) associated with a significant increase in insurance expenditures. Households who switched from the farm to non-farm sector in 2007 are significantly negatively associated with insurance expenditures in the western region. Social implications Inequalities in the degree of economic development play an important role in insurance consumption. Originality/value The authors assess the determinants of insurance market development in the agricultural sector in China, characterized by inter-regional disparities in economic development.

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