Government Participation,Risk Perception Of Farmers And Willingness To Purchase Agricultural Insurance

As a large agricultural country, agriculture plays an important role in the foundation of the national economy in China. Food security and agricultural development is directly related to national economic development, social stability and national self-reliance. However, the agricultural production is suffering kinds of natural disaster's attack, which have a bad impact on the stability of agricultural production and farmers' income. And with global climate warming, the deterioration of ecological environment and natural resource constraints, the situation of natural disaster that agriculture facing will become more severe. China's production mode of small-scale rural family as the main contractor currently decides that risk prevention and risk transfer capability of farmers all are weak. Besides, with the relatively weakness of agricultural infrastructure, farmers is short of effective solutions when they facing natural disaster risk, which leads to the risk and instability of agricultural production increasing largely.As an important means to transfer agricultural risks and compensating the losses of risk, the agricultural risk plays a positive and key role in relieving the threat of agriculture risk, ensuring agricultural security, promoting the adjustment of agricultural structure, or in the guarantee of farmers'income, perfect rural finance environment and promoting rural economic development. Throughout the course of the evolution of China's agricultural insurance, it has experienced a development of arduous and tortuous, and has a late start, lacking of efficient experience, having a low level of coverage and low enthusiasm of farmers. How to increase the effective demand for agricultural insurance is the problem in the development process of agricultural insurance to solve necessarily.This paper focused on the willingness to purchase agricultural insurance, which has the nature of policy in China. Government participation in the development of agricultural insurance, through formulating and implementing a series of policies and measures to solve the agricultural insurance market failure and to facilitate the promotion of agricultural insurance demand, which in the long-term practice of agricultural insurance in a majority of countries has been confirmed. While talking about China's policy agricultural insurance, we cannot keep away from the government's inducement of policies and institutions. However farmers as the main demand subject of agricultural insurance, whose behavior of economic decision-making will determine that government's agricultural insurance policy whether could achieve the expected result, as well as the effective sustainability of agricultural insurance's operation. Besides, farmers' behavior of economic decision-making is in addition to be stimulated by external factors, usually is also driven by the inherent complexity of mental activity of farmers, so it is necessary to make research on the farmers'behavior of decision-making on agricultural insurance. This paper based on the farmer's point of view, integrating the theory and methods of psychology, sociology, economics, insurance, from the government's participation (external factors) and farmers'risk perception (internal factors), using the micro survey data of farmers to explore the level and path of these factors' impact on farmers'willingness to purchase agricultural insurance. According to this, the paper proposes some targeted and constructive policy suggestions.The main contents and structure of the paper is organized as follows:Chapter 0 introduces the background, the significance, the methods, and the framework of this research, then concludes the advantages and disadvantages of this paper. In addition, this chapter reviews the main studies at home and abroad of agricultural insurance and willingness to purchase insurance.Chapter 1:The concept definition and theoretical basis. This chapter firstly describes the definition of agricultural risk, agricultural insurance, risk perception and willingness to purchase insurance, determining the object of this paper is the willingness to purchase crop insurance in policy agricultural insurance. Then this chapter introduces the basic theory about this research, such as quasi-public goods theory, welfare economics theory, market failure theory, behavioral economics and risk perception theory.Chapter 2:China's agricultural risk overview and the evolution of agricultural insurance. This chapter includes two sections. First of the chapter, the author describes the feature of agricultural risk and agricultural natural disaster in China, which concludes that China's current annual agricultural disaster area remains high and agricultural production facing a severe situation of natural risks. Because of farmers own weak ability to prevent and resist risks, they have urgent need of scientific and effective agricultural risk management instruments, and the establishment of agricultural risk security system is particularly important in which agricultural insurance as the core. The second section makes a brief summary of the evolution of China's agricultural insurance, which shows that the development of China's agricultural insurance twisted and turned. Nowadays, with the various and active guidance and support from government regulations, policies and measures, the policy-oriented agricultural insurance finally achieved initial results. However, agricultural insurance in China has a late start, lacking of efficient experience, having a low level of coverage and low enthusiasm of farmers. In a new round of pilot since 2004, there are many problems constraining the development of the agricultural insurance, which includes government's premiums subsidies and cover types, as well as the degree of compensation for the loss are to be improved, uneven development of agricultural insurance in all districts, the farmers'enthusiasm is not high, and the demand of agricultural insurance is still insufficient.Chapter 3:Risk perception of farmers and the effect of government participation. This chapter is the key of full context that put forwards that farmers' agricultural risk perception is usually based on their own subjective feelings and experience to judge by farmers'inner psychological and emotional factors and outside information stimulation which will lead farmers to adopt different risk response behavior, through the use of behavioral economics, risk perception theory, and the methods of psychology. Based on this, the chapter uses micro survey data to make empirical analysis on risk perception. This chapter sets several variables such as emotional state, the agricultural risk information awareness, information dissemination of agricultural risk, and proposes three hypotheses H1, H2, H3. After conducting Pearson correlation analysis and Logistic regression, the research infers that farmers tend to be more anxiety, having the higher information concern of agricultural risk, government involvement in agricultural risks information dissemination, and the level of risk perception of farmers is higher. Finally, the chapter uses the Probit regression to do robust test about the results above.Chapter 4:The empirical analysis of government subsidies and risk perception influencing the willingness to purchase agricultural insurance. This chapter applies the theory of behavioral economics to improve the traditional model of decision-making behavior of rational economic man, establishing a theoretical framework of purchasing decision-making based on limited rationality assumptions, and putting forwards that farmers'willingness to purchase in addition to depending on the farmer'personal characteristics, level of wealth of the family, family farming resources, the expected degree of disaster loss, government's premiums subsidies and insurance cognition, but also by the risk perception factors. Based on the theoretical framework, selecting the government's premium subsidies, farmers'risk perception as the key variables, and the personal characteristics of farmers, family economic characteristics, and insurance cognition as control variables, the author proposes two hypotheses H4, H5. Then the chapter applies national survey data from 991 farmer households in 8 provinces, to empirically analyze the factors affecting the farm householders'willingness to purchase agricultural insurance through non-parametric Mann-Whitney test, Pearson correlation analysis and Logistic model. Empirical analysis shows that government's premium subsidies and farmers'risk perception have a statistically significant positive effect on their willingness to purchase agricultural insurance. In addition, the author divides the sample area into three regions:North, Central and Southwest, then using the survey data of each region to make regression research, the result showing that government's premium subsidies and farmers' risk perception have a different level of impact on famers'willingness to purchase in three different regions.Chapter 5:Conclusions and policy suggestions. Through concluding the research results above, this chapter put forwards that the influencing path of government participation, farmers'risk perception on willingness to purchase agricultural insurance, or farmers'willing to buy agricultural insurance not only affected by their risk perception, also by government policies such as premium subsidies. According to this, some policy proposals are put forward by the study as follows. Firstly, implementing the propaganda and education of agricultural disaster information and prevention information to induce farmers to enhance the level of risk perception; Secondly, promoting and improving the premium subsidies policy of agricultural insurance; Thirdly, providing differentiated multi-level agricultural insurance products; Finally, promoting agricultural insurance, rural social security system and rural credit to be integrated developing, making a synergistic effect on stable development of agriculture, increasing farmer's income and upgrading the power rural development.