Area Yield Index Insurance or Farm Yield Crop Insurance? Chinese Perspectives on Farmers' Welfare and Government Subsidy Effectiveness

Tao Ye, Wuyang Hu, Barry J. Barnett, Jiwei Wang, Yu Gao

Research output: Contribution to journalArticlepeer-review

12 Scopus citations

Abstract

We evaluate the performance of area yield crop insurance (AYCI) and farm yield crop insurance (FYCI) using farm-level yield data from China, focusing on their effects on farmers' welfare, and their cost-effectiveness in terms of government subsidy. Given a subsidy rate sufficient to generate a politically acceptable participation level, the price advantage of AYCI may no longer offset its higher basis risk, and consequently FYCI may be preferred by farmers. From the government's perspective, AYCI is the cheapest option to maintain reasonable farmer participation in insurance, but is not necessarily the most cost-effective choice. Our findings suggest that, contrary to an assumption that informs many developing country agricultural insurance programmes, AYCI schemes are not necessarily preferred to FYCI. Decisions on the structure of a national agricultural insurance programme should be based on careful consideration of local conditions.

Original languageEnglish
Pages (from-to)144-164
Number of pages21
JournalJournal of Agricultural Economics
Volume71
Issue number1
DOIs
StatePublished - Feb 1 2020

Bibliographical note

Publisher Copyright:
© 2019 The Agricultural Economics Society

Keywords

  • area yield crop insurance
  • farm yield crop insurance
  • farmers' welfare
  • subsidy cost-effectiveness

ASJC Scopus subject areas

  • Agricultural and Biological Sciences (miscellaneous)
  • Economics and Econometrics

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