Beyond risk management: Crop insurance premium subsidies reduce cropland abandonment in China

Abstract

Although crop insurance is widely acknowledged as an effective risk management strategy for safeguarding food security, the causality between crop insurance premium subsidies and cropland abandonment remains inadequately investigated. This study employs a staggered difference-in-differences model to investigate the impact of the Crop Insurance Premium Subsidies Program (CISP) on cropland abandonment using representative household-level panel data from China spanning from 2004 to 2012. Our analysis reveals that crop insurance premium subsidies significantly mitigate cropland abandonment. This relationship is primarily due to the stabilisation of household income growth, which incentivises farmers to augment agricultural inputs and enhance development resilience. Furthermore, our heterogeneous analysis indicates that the effect of the CISP is more pronounced in households located in non-grain-producing regions or areas with lower economic development. These findings underscore the previously overlooked role of crop insurance premium subsidies in preventing cropland abandonment and offer new insights into measures aimed at ensuring food security.