Factors Affecting Farmers’ Crop Insurance Participation in China

Abstract

China's latest crop insurance program, launched in 2007, provides an excellent opportunity to explore the factors affecting farmers’ crop insurance purchase decisions, particularly decision making when crop insurance was first introduced into rural communities. This study surveyed all households in Kuangjiaqiao Village, Changde, Hunan Province, China over a four-year period, from 2007 to 2010. Using basic regression models for cross-sectional analysis and advanced models to consider lag effects, this study identifies the dominant factors influencing farmers’ crop insurance decisions. Results indicate farmers developed a dynamic adaptive process toward the new crop insurance. Farmers initially made relatively arbitrary decisions that were significantly influenced by community insistence or pressure to conform. Then, farmers gradually established more rational decision-making mechanisms in which yield volatility, education, and engagement experience became statistically significant. The focus on the initial stages of the crop insurance program from this study helps improve our understanding of the demands within this rapidly growing market in China.