Study On Rural Household’s Decision Making On Agricultural Production And Business

Rural household plays crucial role in agricultural production and business. Household’s decision making on agricultural production and business not only affect micro resources allocation and household’s income directly, but also the agricultural production structure, rural industrial structure and rural labor employment structure. This report examines the behavior of households’production and business, consists of the following two parts:The first part, this report examines the current conditions of risks faced by local agricultural production and the result of pilot implementations of agricultural insurance based on a field survey in the pioneer Provinces of Shandong and Sichuan. Secondly, combined with the understanding of the farmers’ perception on the importance of agricultural insurance, a theoretical framework will be developed to describe the mechanism underlying the impact agricultural insurance has on household behavior. Thirdly, based on information collected through the survey, the paper attempts to offer empirical explanation on producers’ willingness to participate in and to pay for agricultural insurance. Fourthly, by constructing a working model of agricultural production decision making under risks, this paper simulates the impacts that different combination of "insurance premium" ana insurance coverage" have on rural households’ decision making on resources allocation, including the scale of production, factor input, risks and expected income. Finally, the paper explores how agricultural insurance contracts affect households’production decision making, and the results and potential impacts from implementing agricultural insurance. This papers conclude with a summary, and an outline of policy implications and suggestions from4aspects, government, insurance company, agricultural company and the rural households. Main conclusions are the follows:Firstly, supply of agricultural insurance is rather insufficient, both the inruance premium and coverage are lower than needed. Secondly, transaction cost is high, there are conflicts between the supply and demand. Thirdly, Agricultural insurance change rural households’expectation on agricultural production and business, therefore they will allocate labor resource accordingly, thus land and capital are adjusted and expected income and risk are also changed. Fourthly, different agricultural insurance has different impact on households’ resource allocation. Given the same premium, higher coverage will have greater impact, lower premium but higher coverage might be the best in encouraging farmers put more resources in agriculture production.The second part, the author studies the households’grain store behavior. First, based on survey data from Shandong province, this paper analyzes the basic situation of households’grain store, with an emphasis on the willingness to adopt the scientific grain store technology, then makes comparative analysis on the amount of grain store according to household’s age, education, family income and land area respectively. A linear analysis is also used to analyze factors that have impact on the amount of households’grain store. The main conclusions and implications are the follows:The first, the amount of grain store is stable in the recent three years, rural households’grain store is mainly for rations, meeting the demand of9months, while the storage of corn is mainly for fee, which is about6-month-use. The main containers to keep grain are bags and cylinder, loss during the storage comes from rodents, insects and fungi, the average loss, wheat is higher than corn. The second, the adoption for the scientific grain store technology is rather low, mainly because of the absence of local promotion. Many peasants are willing to buy if promoted. The effect is obvious for those have adopted, the loss of wheat and corm is about to reduce30kilograms, those peasants praise highly for the scientific grain store technology, but expect subsidies from the government when buying the metal warehouse. The third, those households who have more non-farm employment opportunities and higher income incline to reserve less grain, while those who are farther away from the bazaars reserve more. Therefore, the local economic development affects the households’grain store amount. The forth, rural credit service has an important influence on households’grain store amount and adoption on the metal warehouse. Therefore it should be constructed into a system of combing scientific grain store technology, rural credit, rural information and other agricultural services.