Welfare Effects And Revelation Of Government Subsidies On Agricultural Insurance

China owns more population than any other country in the world. What to eat is a vital problem of the country, which is related to the country’s long-term stability. With the acceleration of urbanization, the price scissors of industrial and agricultural increased rapidly. It’s time for industry to nurture agriculture. Commercial agricultural insurance had failed, the government need to design a system according to our own national conditions, and vigorously promote the implementation. In this research, we tried to solve to problem in the view welfare economics, to investigate the effects of government subsidies to agricultural insurance, to provide a theoretical basis and reference for the launching of China’s agricultural insurance. The main conclusions are as follows:(1) Agriculture is the foundation of the national economy, agricultural insurance is one of the ways for the government to output subsidies, which is allowed by WTO, it takes an important role on the stability and the promotion of agriculture. The farmers are not the only beneficiary when they bought agricultural insurance, consumers would share the beneficiaries, too. Therefore, agricultural insurance has positive externalities; agricultural insurance is different from private products, and close to public goods, it is less exclusive and competitive, so it is a quasi-public goods; agricultural insurance had high pay rate and paid rate was also high, so difficult to carry out in the absence of subsidies, that indicates its inferiority; agricultural insurance would face complex disasters, and many disasters will cause serious losses. Therefore, the agricultural insurance has a high risk. In conclusion, the government must make agricultural insurance different from commercial insurance on policies and regulatory, to promote agricultural insurance healthy and sustainable.(2) When farmers insured, the welfare of the entire population and consumers will inevitably increase, and consumers are the biggest beneficiaries, while the welfare of the farmers may be harmed. When government subsidies is unchanging, subsidies given to farmers would lead to the highest transaction price of agricultural insurance; subsidies given to the insurance companies would lead to the lowest transaction price; subsidies given to farmers and insurance companies by a certain percentage would lead to transaction price between the two price. The government’s subsidies to farmers and insurance companies should be the right subsidies scales. That’s because the subsidies cannot be completely converted to the welfare of farmers and consumers, but also caused welfare loss. Government subsidies for farmers, insurance companies and the government itself will have some positive effects and negative effects; the Government should formulate relevant laws and regulations, and strengthen supervision to ensure the orderly conduct of the subsidy.(3) China’s agricultural insurance had experienced a tortuous and arduous process, gradually maturing this year. We should attach importance to the role of agricultural insurance on agricultural stability and social stability; the agricultural insurance should be used as a means of distribution on urban-rural income. Government subsidy efforts need to be strengthened. In the less developed regions, the farmers only the receive subsidies from central and provincial finance, which lead to lower agricultural insurance coverage in these areas. The distribution ways of subsidies should also be enriched gradually along with the social development and adjustment. China recently issued "Agricultural Insurance Regulations", some problems will encounter in the process, and inevitably need further legal norms. In addition, our risk-sharing system in a major natural disaster catastrophe has not yet been established, reinsurance mechanism is not perfect, we need to learn from foreign experience, to build unique risk-sharing mechanisms, to establish catastrophe reserves, mutual insurance mechanism and agricultural insurance reinsurance mechanism, and make agricultural insures more important in the post-disaster reconstruction.