Analysis on the effect of farmer income of policy-based agricultural insurance

ABSTRACT The effect of policy-oriented agricultural insurance on increasing farmers’ income has been controversial all the time. In light of this, this paper first clarifies the operation mechanism of policy-oriented agricultural insurance and its influence mechanism on farmers’ income from the theoretical level. Secondly, the fixed-effect model and panel quantile regression are used to empirically test the income effect of policy-based agricultural insurance on farmers, especially the effect on farmers of different income groups based on the panel data of 31 provinces (autonomous regions and municipalities directly under the central government) in China from 2007 to 2019. The results show that although policy-oriented agricultural insurance is beneficial to the increase of farmers’ income on the whole, which has significant heterogeneity on farmers of different income groups, and its influence becomes greater with the increase of farmers’ income. In the future, China should attach importance to the design of differentiated subsidy system, adhere to demand orientation so as to be vigilant that agricultural insurance will become the inducement of widening income gap in rural areas on the basis of vigorously develop policy-based agricultural insurance in a continuous manner.