Influence Of Social Networks And Risk Perception On Farmers' Willingness To Purchase Agricultural Insurance

Small-scale farm households in China who run decentralized agricultural operations have weak capability for risk tolerance and diversification.When confronting recurrent natural disasters,the farmers hardly figure out effective measures to mitigate related risks in their agricultural operations,which would bring out in huge losses of agricultural production,aggravate household poverty,and impose serious influences on the stability of agricultural production and operation,food security and economic development of China consequently.In the past consecutive three years,No.1 Document from the national central government proposed to strengthen small-scale farm households' capability against risks,accelerate the establishment of newly agricultural assistance and protection policy system,and ensure farm households' basic farming benefits.As a crucial component of the national agricultural development policy system,agricultural insurance is an important instrument for spreading agricultural risks,which is beneficial to stabilize farmers' income and agricultural production and operation.However,the formal insurance market in Chinese rural regions is not perfect at the present stage,and agricultural insurance has some problems,like high premiums,limited coverage,less options etc.Utilizing their own social networks to diversify risk is a major way for Chinese farmers.On the one hand,farmers can mitigate the impact of risks on income through borrowing money from their relatives and friends,or mutual assistance provided by social networks.On the other hand,information about risks and planting experience and technology transmitted through social networks prompts farmers to take preventive measures in advance to avoid agricultural risks.In addition,the prerequisite for farmers to adopt risk response strategies is individual subjective recognition and perception of risk.Therefore,it is of great significance to study the influence of social networks and risk perception on farmers' willingness to purchase agricultural insurance.In conjunction with multidimensional theories(including expected utility theory,insurance demand theory,social network theory,and risk perception theory),this study reviews relevant domestic and foreign literature systematically.Based on farmers' social networks and risk perception,this paper firstly analyzes the current situation farmers' willingness to purchase agricultural insurance by utilizing the micro-survey data of 263 households in Dingxi City of Gansu Province.Secondly,this paper establishes socialnetwork and risk perception indicators system,network trust,network reciprocity and network scale are extracted and measured as three major indicators of the social network through factor analysis accordingly.Thirdly,Ordered Probit model is employed to substantiate the impacts of the overall social network incorporating its three dimensions(network trust,network reciprocity,network scale)and risk perception on farmers' willingness to purchase agricultural insurance.Meanwhile hierarchical regression analysis is conducted to verify the mediating effect of risk perception on farmers' willingness to purchase agricultural insurance from the perspective of social network,and robustness test of results is performed accordingly.Finally,in accordance with empirical analysis,this paper puts forward policy-making suggestions how to improve the agricultural insurance system and perfect the risk response mechanism,so as to provide theoretical and practical implications for the innovation of agricultural insurance system in China.The conclusions of this paper are as follows:(1)Willingness to purchase agricultural insurance among farmers are varied,wherein45.25% with low willingness,39.92% with moderate willingness,and only 14.83% with high willingness.Overall,the willingness of farmers to purchase agricultural insurance is low.(2)Social networks impose significant negative influences on farmers' willingness to purchase agricultural insurance,wherein network trust and network reciprocity exert significant negative impacts while network scale exerts significant positive impacts.In addition,all of four control variables(education level of householders,the percentage of income from farming against total household income,the percentage of received agricultural subsidies against total household income,and hit by natural disasters or not)exert significant positive influences on farmers' willingness to purchase agricultural insurance.(3)Risk perception imposes significant positive influence on farmers' willingness to purchase agricultural insurance.Moreover,three control variables(education level of householders,number of farming manpower in household members,and the percentage of agricultural subsidies against total household income)exert significant positive influences on farmers' purchase intentions for agricultural insurance.(4)Risk perception plays mediating effect between farmers' willingness to purchase agricultural insurance,social networks and its three dimensions of network trust,network reciprocity,and network scale,wherein direct effect of social network on willingness to purchase agricultural insurance is-0.501,accounting for 76.61% of the total effect;the mediating effect of risk perception between the social network and willingness to purchase agricultural insurance is-0.153,accounting for 23.39% of the total effect,implicating thatmediating effect of risk perception between social networks and willingness to purchase agricultural insurance is secondary and fractional,while the direct effect of social networks on farmers' willingness to purchase agricultural insurance is dominant and primary.In order to strengthen the farmers' capability against risks and facilitate farmers engaging in agricultural insurance,in terms of drawn conclusions of the study,this paper puts forward policy-making suggestions on strengthening of social network development,perfection of risk response mechanisms,improvement of the agricultural insurance system,and promotion of constructive interactions between agricultural insurance and non-insurance risk management methods.