The role of agricultural insurance in boosting agricultural output: An aggregate analysis from Chinese provinces

Abstract

Agricultural insurance is a significant driver of agricultural development worldwide. In this paper, a fixed‐effects panel approach and instrumental variable regressions are used to examine the impact of agricultural insurance on agricultural output in China. The study is based on panel data from 31 Chinese provinces over the period 2004 to 2018. Findings indicate that agricultural insurance led to a significant increase in aggregate agricultural output across provinces. The results remain robust when potential endogeneity in insurance uptake is considered. In addition, mechanism tests were performed to identify the channels through which insurance influences productivity. These show that agricultural insurance contributes to increasing labor productivity and the area of cultivated land per capita and encourages specialized planting, all of which promote growth in agricultural production. Finally, agricultural insurance plays a more important role in Eastern China and nonmajor crop‐producing areas [EconLit Citations: Q13, Q18].

Agricultural Insurance and Agricultural Economic Growth: The Case of Zhejiang Province in China

“…Fourth, the development of AI can promote the growth of AO, and has a certain boosting effect on the growth of AE. This is in line with [ 1 ]. However, compared with other variables, its impact is smaller.…”

“…AI can positively promote AP and economic growth among agricultural households [ 21 ]. AI led to a significant increase in aggregate AO across China’s provinces [ 1 ]. The AI subsidy policy encourages farmers to expand their production scale by mitigating production risks [ 22 ].…”

“…AI has a different impact on different regions and farmers. The policy effect is heterogeneous in different regions [ 22 ]; it plays a more important role in eastern China and nonmajor crop-producing areas [ 1 ]. The total cost insurance pilot program increases farmers’ income, compared with central and western regions, and farmers’ income is more likely to increase in the eastern regions [ 39 ].…”

“…There is much literature that take analyses the importance and effect of AI. AI is a significant driver of agricultural development worldwide [ 1 ], as it is one of the management risk tools [ 2 , 3 ] that is now widely recognized as an important means of protection for production and for the life of people in rural areas [ 4 ]. AI has a special social and ecological significance, wherein it is the driver of rural development at the same time [ 5 ], and it can play an impactful role in reducing uncertainty and, consequently, increasing investment [ 6 ].…”

“…With the rapid development of China’s AI, there are some shortages, such as unbalanced regional development and a lack of characteristic types of AI. AI plays a more important role in eastern China and non-major crop-producing areas [ 1 ]. The AI subsidy in China’s central and western regions with a relatively low level of economic development is dominated by government financial premium subsidies, while China’s eastern regions with a relatively high level of economic development should seek diversified forms of subsidies other than premium subsidies.…”