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Research of the Effect of China Agricultural Insurance
on Agricultural Production
Peiru Zhao
China Agricultural University，College of Economics and Management

Contributed paper prepared for presentation at the 63rd AARES Annual Conference,
Melbourne, Vic 12-15 February 2019

Copyright 2018 by Authors names. All rights reserved. Readers may make verbatim copies
of this document for non-commercial purposes by any means, provided that this copyright
notice appears on all such copies.
 Research of the Effect of China Agricultural Insurance
on Agricultural Production
Peiru Zhao
China Agricultural University，College of Economics and Management

Abstract

Agricultural insurance has been implemented for more than ten years in China. It is of
great significance to analyse the impact of agricultural insurance on agricultural production in
order to further design and promote innovative agricultural insurance. From a national
perspective, 31 provinces in China are divided into four agricultural insurance development
regions according to the level of economic development and agricultural development by
cluster analysis. Then panel data model is used to analyse the impact of national and four
regions agricultural insurance on agricultural production value. The empirical results show that
the gross value of agricultural production is positively and significantly affected by agricultural
insurance, planting area, loss ratio, and human capital.

Keywords
agricultural insurance；panel data model；agricultural production；agricultural risk

Introduction
（1）Research Backgrounds

① The Rapid Development of China Agricultural Insurance: Indicators like insurance amount，
insurance applicant and insurance coverage have been growing;

② China agricultural insurance affects Chinese agriculture: Both the agricultural income and
production can be affected by agricultural insurance;

③ China Agricultural insurance still has large rise space in the future: New insurance is being
piloted, agricultural insurance promotion is deepening.

（2）Literature Review

① Theory research ： use the theory of consumer surplus (Liu&Han,2015), Descriptive

statistical analysis, comparative (Li&Xiao,2011;Liu,2013).

② Research on regional differences ： sub-regional setting of subsidies on agricultural

insurance premiums has a positive effect on the implementation of agricultural insurance
(Wang ,2011, Peng &Long,2014).
③ Effect of Agricultural Insurance ： Agricultural insurance played a positive role in
agricultural production and agricultural income (Zhou,Zhao&Yin,2015,Liang, Liang
&Dong,2008).

Methods
(1) Models

For separating the regions，the cluster analysis model was selected and the system clustering
method was used to measure the Eucliden distance.

For analyse the impact of national and four regions agricultural insurance on agricultural
production value，the panel model is selected as follow：

LnYt = c + β1 lnAreait + β2 lnRateit + β3 lnDevit + β4 lnHrit + μit

“Y” represents the level of development of agricultural production and is used as an

explanatory variable in the model. Use the per capita value of agriculture to express variables.

“Area” expressed by Crop sown area/primary employment in rural areas. The larger the per
capita crop area sown, the greater the agricultural output value and the higher the added value.

“Rate” expressed by the rate of agricultural insurance claims. The higher the claim ratio, the
greater the compensation for agricultural insurance for agricultural production, and the more
favourable it is for affected farmers to resume agricultural production.

“Dev” expressed by per capita agricultural insurance premium income. Responding to the
development level of agricultural insurance, the greater the value, the higher the level of
agricultural development and the greater the role played in the agricultural production
process.

“Hr” Human capital can increase labor productivity and reduce production costs
The number of years of education per capita used in the model as an indicator of human
capital.

(2) Data

The data was selected from the 2017 China Statistical Yearbook.

Results
（1）Analysis of Regional Differences

According to the results of cluster analysis, the situation of agricultural insurance in various
provinces in China can be divided into four categories:
 Level of economy development

Jilin, Yunnan,
Heilongjiang, Shanxi,
Guizhou, Tianjin, Jiangsu,
Chongqing, Jiangxi, Guangdong
Guangxi, Inner Mongolia. and Shandong.

Level of Agriculture
development

Qinghai,
Zhejiang, Henan, Ningxia,
Beijing, Anhui, Hainan,
Liaoning, Shanghai, Tibet,
Fujian, Hubei, Gansu
Sichuan, Hebei, Hunan. and Xinjiang.
（2）Analysis of the Effect on Agricultural Production

Table1：Regression analysis of the effect of agricultural insurance on agricultural production

variable country The first area The second area The third area The fourth area

c -7.7178*** -12.3413*** -3.0482*** -6.6979*** -10.4373***

(7.70） (-7.66） (-2.61） （-6.76） (-4.00）

lnArea 0.6743*** 0.6919*** 0.2178 0.6489*** 0.6179***

(14.47） (5.98） (1.05） (15.37） (7.72）

lnRate 0.0478*** 0.0399 0.6680 0.0735** 0.0758**

(2.80） (1.37） (1.27） (2.47） (2.34）

lnDev 0.1953*** 0.1866*** 0.2144*** 0.1692*** 0.1205***

（13.21） (7.63） (4.82） (9.05） (4.97）

LnHr 2.0652*** 4.4659*** 0.8399 1.9496*** 4.0411***

(4.61） (5.99） (1.14） (4.20） (3.35）

Adj.R2 0.4206 0.6676 0.4365 0.2378 0.9277

Model Fixed Fixed effects Random effects Fixed effects Fixed effects
type effects model model model model
model

①Agricultural insurance has a noticeable positive relationship with Agricultural production

across the country. When the variate of the area under crops are positive numbers, it means that
the increases of the area benefit to spread risk and guarantee agricultural production. And the
insurance loss ratios are positive numbers, it can reduce farmers’ loss from natural disaster and
recovery the agricultural production. What’s more, human capital are positive numbers proves
that the higher education framers received, the higher possibilities they will buy agricultural
insurance, and they will perform more perfectively in the risk of agricultural production
knowledge management system.

②Across the area, the first kind of areas have higher agricultural level, besides, the variates of
their agricultural insurance, the area under crop and human capital are obviously positive
numbers, and it slight effects agricultural production and loss ration positively, cause the areas
have already gone into a relative advanced agricultural stage, the insurance companies having
their cutting loss mode which can influence the speed and amount of money for compensation.
Furthermore, the second kind of areas runs in under-development economic society, only their
agricultural insurance has been obviously developed, the other variates are unnoticed positive
numbers, probably because of the negative effect comes from their geography and climate.

Moreover, the third kind of areas have higher level of economy with relative lower ratio of
agriculture, and the variates in the areas are all noticeable positive numbers, which means that
they have a high level of agricultural insurance development and the education framers received,
also the higher acceptation of agricultural insurance. Although agriculture occupies a lower
ratio in their area, they are more advanced in risk prevention.

Besides, the forth kind of areas are the area where the economy and the agriculture are both
well-developed, and the variates are all positive numbers, what’s more, the ratio of agriculture
is relative high in this kind of area, and the people living there value their agricultural
production much, and they have their professional insurance companies to assist government
to implement agricultural insurance plan, the insurance positively effects their agricultural
production in the areas.

Discussion
①From the perspective of the national and classified regions, the level of agricultural insurance
development has a significant impact on agricultural production.

②The sown area of crops and human capital combined with agricultural insurance have a
significant impact on agricultural production.

③The impact of the ratio of claims on agricultural production has much room for growth.

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