Does agricultural insurance promote primary industry production? Evidence from a quasi-experiment in China
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Does agricultural insurance promote primary industry production? Evidence from a quasi‑experiment in China Yugang Ding1 · Cheng Sun2 Received: 7 November 2019 / Accepted: 26 October 2020 © Springer Nature Limited part of Springer Nature 2020
Abstract Whether agricultural insurance promotes primary industry production has been debated for decades. Our paper studies this question based on the agricultural insurance premium subsidy policy in China. We use this quasi-experiment to conduct difference-in-differences and event study estimations. We find that the development of agricultural insurance, induced by premium subsidies, significantly promotes primary industry production; per person, it increases by CNY 1430 in subsidised provinces compared to unsubsidised provinces. We use county-level data to address the aggregation problem in our province-level analysis and obtain the same conclusion. We also find that agricultural insurance primarily affects agriculture and husbandry among the four subindustries of the primary industry. Keywords Agricultural Insurance · Premium Subsidy · Primary Industry · Quasiexperiment
Introduction Agricultural insurance is critical in assisting agricultural producers to lessen the negative impacts of adverse natural events. It guarantees the progress of agricultural reproduction and stabilises the income of agricultural producers (Coble and Barnett 2013; Cole and Xiong 2017). In many countries, the agricultural insurance market is supported by the government (Weng et al. 2017). Premium subsidies are the most common form of government intervention in agricultural insurance (Mahul and Stutley 2010). Although this domestic support is costly, it creates great benefits. To be more specific, it stimulates the agricultural insurance market. Theoretically, * Cheng Sun [email protected] 1
Department of Risk Management and Insurance, School of Economics, Peking University, Beijing, China
2
Department of Applied Economics, Guanghua School of Management, Peking University, Beijing, China
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Y. Ding, C. Sun
Fig. 1 Development of the agricultural insurance market for the treatment and control groups. This figure shows the difference in agricultural insurance development for the treatment group (phase 1 pilot provinces) and control group. Panel A depicts the premium income per capita and Panel B depicts payment per capita. The premium income (payment) per capita for each group is the ratio of total premium income (payment) to the total rural population. The vertical dashed line indicates the year before the premium subsidy policy was introduced
with the development of the agricultural insurance market, primary industry production should also increase (Xu and Liao 2014). Yet, empirical studies on this issue produce ambiguous results. Some researchers find positive effects of agricultural insurance on primary industry production (e.g. Alhassan and Fiador 2014; Pradhan et al. 2015; Zhang et al. 2016), while others do not (e.g. Goodwin and Smith 2013; Lee et al. 2016; Ward
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