The Effect Of Dairy Cattle Insurance On Mitigating Losses And Behavior Of Farmers

Dairy Cattle insurance as a non-price protection tool which could decentralized risk and losses of dairy farming, have been paid more attention by every government. China government implemented Dairy Cattle insurance policy with premiums subsidies since 2008.The fundamental purpose of this policy is to compensate for the loss of farmers, stable income of farmers, increase the supply of high quality raw materials to ensure the stable development of the dairy industry. However, how about the actual effect on mitigating losses of dairy cattle insurance? Whether the implementation of dairy cattle insurance policies can exert an influence on expanding the scale of production and change farmers’ anti-risk inputs? What are the existing problems and deficiencies of the current dairy insurance policy in China? Under the background of the urgent need of a kind of effective risk diversification tool for dairy industry in China, the research and discussion on the above issues are of great significance. The information from this study should be useful for the further improvement of the dairy cattle insurance in China.In view of this, this paper selects the main area of dairy farming in China-the Inner Mongolia Autonomous Region as the study area. Based on the survey data of dairy farmers, this paper from the perspective of theoretical analysis and empirical analysis to verify the dairy cattle insurance whether can mitigate farmer’s losses, and identify the impact of insurance policy for the scale of farm and epidemic prevention investment, under the current agricultural insurance policy.of "the government guides, the market operates" and "low guarantee, wide coverage". Through the above study, at the same time, this paper summarizes the existing problems and deficiencies of dairy cattle insurance in our country. And combined with the development characteristics of dairy cattle insurance in foreign countries, this paper puts forward suggestions to further improve the policy system of dairy cattle insurance in China from the perspective of improving the design of the dairy cattle insurance system, increasing the innovation of dairy cattle insurance products and so on. The main research contents of this paper and the corresponding conclusions are as follows:(1) Farmers’ subjective evaluation of the effect of dairy cattle insurance on mitigating losses and the related influencing factors.Based on the survey data of dairy farmers in Inner Mongolia, this article applies the comparative analysis method to investigate the subjective evaluation of different farmers on the current dairy cattle insurance. The results show that the overall evaluation of farmers on the effect of dairy cattle insurance on mitigating losses is high. But, the farmers with different individual characteristics, operating characteristics and risk characteristics show a significant difference in the subjective evaluation. In addition, the regression results of order Logit model show that the factors such as "the farmer is a management personnel, the loan, the number of dairy cattle, the mortality rate of dairy cattle and farmers’ cognition of the guarantee level of the dairy cattle insurance" have significant effect on farmers’ subjective evaluation of the insurance on mitigating losses.(2) An empirical test on the effect of dairy cattle insurance on mitigating losses.In theory, the dairy cattle insurance supported by the finance department of the government has the effect of reducing the death losses of dairy cattle of farmers. However, based on the survey data of dairy farmers in Inner Mongolia, this paper applies difference-in-difference (DID) model and the propensity score matching difference-in-difference (PSM-DID) model for empirical test and analysis, and the results show that the dairy cattle insurance cannot significantly reduce the insured farmers’ losses causing by the death of dairy cattle under the current dairy cattle insurance policy of "low-guarantee, wide-coverage," and "the death insurance coverage" in Inner Mongolia.(3) Effects of dairy cattle insurance on farmers’ decision-making behavior for the scale of dairy farming.In theory, the dairy cattle insurance can improve the comparative advantage of dairy farming, in other words, it can encourage farmers to increase the inputs of production resources for dairy farming and expand the scale of dairy farming. In order to accurately estimate the impact of insurance policy on farmers’ decision-making behavior for the scale of dairy farming, this paper applies Ordinary Least Square (OLS) and the Instrument Variable(Ⅳ) estimation approach for empirical test and analysis. The results show that the dairy cattle insurance have a significant positive effect on the expansion of the dairy farming scale. In addition, in other factors, the loan, the feed cost and average market price of milk are found to have a significant positive effect on the expansion of the scale of dairy farming, and the age of the farmers and whether there are other income in addition to dairy" farming have a significant negative impact on the expansion of the dairy farming scale.(4) Effects of dairy cattle insurance on farmers’ anti-risk inputs.The anti-risk investment behavior of farmers is another important performance of the farmers’ production behavior. In theory, dairy farmers who participate in dairy cattle insurance, taking into account the economic loss-sharing mechanisms of insurance, may reduce the anti-risk inputs, that is, dairy cattle insurance provides incentive for dairy farmers to be less careful in the process of dairy production. However, based on the household survey data in Inner Mongolia, this paper apply Ordinary Least Square (OLS) estimation and Treatment Effects Model (TEM) to test the effect of dairy cattle insurance on farmers’ anti-risk inputs. The findings indicate that the existing dairy cattle insurance policies in China do not have a significant effect on farmers’ anti-risk inputs. In other words, the farmers who participate in dairy cattle insurance, will not weaken their health management measures for dairy cattle, and they do not have negative anti-risk behaviors in the process of dairy production.Innovations of the dissertation lie as follows:Firstly, this paper not only from the perspective of theoretical analysis to analyze the effect of the implementation of the dairy cattle insurance, but also from the perspective of empirical analysis to verify the dairy cattle insurance whether can mitigate farmer’s losses, and identify the impact of insurance policy on farmers’ decision-making behavior for the scale of dairy farming and the farmers’ anti-risk inputs. Research content has greatly enriched the current domestic dairy insurance related empirical research.Secondly, in this paper, according to the characteristics of the current dairy cattle insurance system in Inner Mongolia and the actual situation of dairy farming, some new findings are obtained. This study found that due to the shortcomings of dairy cattle insurance in "insurance coverage", "insurance claims" and other aspects, the effect of dairy cattle insurance on mitigating losses is limited. But as the country’s current agricultural support policy, the dairy cattle can encourage farmers to increase the inputs of production resources for dairy farming and the farmers who participate in dairy cattle insurance do not have negative anti-risk behaviors in the process of dairy production. The above findings that it is helpful to understand the nature of the current dairy cattle insurance in China, which is helpful to provide the correct decision support for the further improvement and development of the dairy cattle insurance.