Economic Analysis On The Effect Of Agricultural Insurance To Agricultural Modernization Development In China

Agricultural insurance is regarded as one of the three pillars of the agriculturalmodernization.The research on agriculture insurance and its role in agricultural modernization hasimportant theoretical and practical significance,especially under the background of China’sagricultural modernization become a national development strategy and the agricultural insuranceregulations promulgated in the current.In this paper, the action of agricultural insurance on agricultural modernization has beensystematic use of economic analysis,integrated using these methods which are qualitative analysis,quantitative analysis, normative analysis, empirical analysis, model analysis and comparativeanalysis,and at last this paper put forward the corresponding policy recommendations according tothe analysis conclusion.The action between agricultural insurance and agricultural modernization is not one-way, but atwo-way. That is, Agricultural insurance promotes the development of agricultural modernizationand provides necessary guarantee for the agricultural modernization,on the contrary, agriculturalmodernization improves the development foundation and development level of agriculturalinsurance. The action is a kind of internal and interactive mechanism. The basic characteristics ofthe interactive mechanism are the basis points gradually ascend, interaction energy syntheticagglomeration, interactive results expanding, and the interactive way as the "cumulative" upwardspiral.The development of agricultural insurance in our country can improve the welfare level of thewhole society. The basic path to raise the level of welfare is to push the peasants transformationfrom risk appetite to risk averse, promote the diversification of agricultural production risk, put touse agricultural technology, improve the rural social security system, etc. But low-level equilibriumof China’s agricultural insurance market restrict the development of agricultural insurance.The roots of the low-level equilibrium mainly are: on the one hand, farmers’ informal riskaversion mechanism strengthen the basis of the current low operation of agricultural insurance; onthe other hand, adverse selection, moral hazard behavior and high transaction costs which arecaused by information asymmetry in agricultural insurance market, and lead both the supplies andthe demands to the low level development trap. The key to governance the low level equilibrium isthe government’s moderate intervention and the transformation of main bodies in agriculturalinsurance market. Government intervention, including perfect legal laws and regulations and othersecurity system and government financial subsidies, tax incentives and other measures, caneffectively eliminate market failure caused by agriculture insurance and achieve effective allocation of agricultural resources. The demand subject of agricultural insurance changes from individualfarmers into legal entity of impersonal attribute, which can promote an incomplete contract to acomplete contract in agricultural insurance market step by step and improve the transactionefficiency. From analysis using the principal-agent theory, this approach is feasible.Empirical analysis shows that the effect agricultural insurance on the modernization ofagriculture is positive and supplementary. In this article, I model and analysis the action of theagricultural insurance to the agricultural modernization using the empirical method, agriculturalinsurance as the independent variable (indicated by the insurance density, insurance payment andinsurance system), three control variables which are gross value of industrial output over the scale,rural residents family productive original value of fixed assets, industrial, and rural labor forceeducated years on average, and the agricultural modernization as the dependent variable (extractedby principal component analysis from seven secondary variables, as the agricultural output,Percapita annual net income of rural residents, agricultural science and technology progresscontribution rate, agricultural machinery total power, agricultural labor productivity, rural residents’consumption level and per capita sales of agricultural products. Through analysis, I can concludethat agricultural insurance is significantly positive influence on agricultural modernization, and theinfluence coefficient in different models keep the relative stability. But compared to the threecontrol variables such as the industrial economy,etc, the model coefficients are relatively low. Thismeans that the action of agricultural insurance in agricultural modernization is a kind of auxiliaryfunction but not leading role, which cannot be overstated.At present, the train of thought to promote agricultural insurance and agriculturalmodernization achieved breakthrough development is to configure the social capital to the field ofagricultural insurance and agricultural. An important opportunity is to seize the current time ofcontrolling the excess liquidity in our country, to make agricultural insurance as a "capital pool" toabsorb excess liquidity at the national level, and through reinsurance system of agriculturalinsurance, to make agriculture and agricultural insurance are stable returns’ industry to make money,higher at least not less than the social average, and then to make agriculture and agriculturalinsurance become a platform to agglomerate social capital and realize the industrial "feedback"agriculture, countryside "feedback".But due to the availability of data and the limitation of the study, in this paper, only sevenhigher weight indexes is selected to evaluate the index of agricultural modernization, evaluation ofaccuracy is not enough.In addition, the economic theory analysis is based on a series of assumptions, in this paperhypothesis related to agricultural modernization and agricultural insurance is based on experiencejudgment, future studies are needed to make more close to actual assumptions according to theresearch situation of ginseng protect farmers, such the results can be applied in practice better. More importantly, this paper proposed a policy thinking that the agricultural insurance andagricultural areas will be completed to absorb liquidity of another "pool", but subject to theconditions, the specific construction of the "pool" and its operation mechanism are made nocorresponding discussion, which should be the future research directions.