Promoting the adoption of environmentally friendly agricultural practices: The role of crop insurance participation

Abstract

This study investigates the impact of crop insurance participation on farmers' adoption of environmentally friendly agricultural practices using microsurvey data from the China Land Economic Survey 2020. Propensity score matching and an endogenous switching probit model are applied to address potential selection bias. We find that crop insurance participation has significant and positive effects on farmers' adoption of straw return and biological pesticides. Specifically, it increases the probability of adopting straw return and biological pesticides by 45.6% and 46.3%, respectively. These impacts are particularly large for younger, larger scale and more risk-averse farmers. Our results highlight the necessity of supporting crop insurance participation to encourage desirable environmental outcomes. We also discuss potential policies to facilitate crop insurance uptake in rural China.