A Research On Effect Simulation Of Developing Crop Revenue Insurance In China

The Minimum Grain Purchase Price policy and the Temporary Purchase and Storage policies for key agricultural products in China face a lot of problems.Chinese government has realized the need to reform the current policies and already carried out the Target Price Policy pilot programs for cotton and soybean in some areas.However,the Target Price Policy itself also has shortcomings,because it still needs a lot of fiscal cost and violates the WTO rules.U.S and other developed countries has taken crop revenue insurance to replace the government price and revenue supporting policies as the main agricultural safety net policy and generate a lot of positive policy impacts.Such that it is very valuable to research U.S and other countries’ experience on crop revenue insurance and do a simulation analysis on whether the crop revenue insurance is valuable in China.This paper firstly research the development of crop insurance in U.S and other countries,especially focusing on U.S crop revenue insuance about its background,the scale and program evolution,program system and characteristics,and policy impacts.From other countries’ experience,we can conclude the enlightments for China.Then this paper takes Xinjiang Cotton as an example,creating a representative cotton producer in Bazhou and Akesu District in Xinjiang based on expected utility theory.In order to simulatate the representative producer’s risky environment,this paper uses the county-level cotton yield data and province-level cotton price data.Considering the correlation of yield and price,this paper uses the Copulas model to run a Monte-carlo simulation to get the representative producer’s numerical distribution of yield and price.Based on this research,this paper then makes the current Cotton Target Price Subsidy Policy and Government-Sponsored Cotton Insurance in Xinjiang province into the model to analyze the policy effect on the representative producers’ welfare and government budget.Finally,this paper compares a single cotton revenue insurance program with the current policy combination to show whether the revenue insurance program is better than the current policy.After the research on other countries’ experience on crop revenue insurance and the simulation study,this paper makes several conclusions.a)Crop revenue insurance should be prior to crop price insuance in China.b)China shall develop crop revenue and yield insurance simultaneously.c)The conditions for China to develop crop revenue insurance is not good enough,however,it is possible for China to run a pilot revenue insurance in some districts and for some crops.d)If China can use the actuarial premium in the government-sponsored crop insurance,the efficiency of the program will increase.e)If crop revenue insurance could replace the current Target Price Subsidy program and Government-Sponsored Crop Insurance programs,the producer could gain the similar revenue protection and economic welfare,but the government cost will significantly decrease.f)Crop revenue insurance program could also decrease the fluctuation of the government subsidy to producers and needs less marginal operation costs than the current programs.The innovation of this paper are the follows: a)It is the first paper in China to have an empirical simulation research on the welfare and subsidy budget effects of crop revenue insurance.b)It is the first paper in China to have a deep research on the background,scale change,program system and characteristics and policy impacts of U.S crop revenue insurance.c)It makes a more deeply research on the feasibility of crop revenue insurance in China.