What are the Effects of Policy-Based Crop Insurance on Capital Factors Inputs? Evidence from Farmers of Heilongjiang Province in China

Abstract

Agricultural insurance, as one of the most efficient approaches to disperse agricultural external risks, has become a vital part of agricultural support and protection policy system in China. As the agricultural production scale is being expanded, and as the agricultural risk management is increasingly demanded in China, further enhancing the status of agricultural insurance in the agricultural support and protection policy system has become the future development direction of policy-based crop insurance in China. Accordingly, this paper primarily focus on the effects of policy-based crop insurance on capital factors` inputs. This study used the two-way fixed effect model and the instrumental variable method to analyze the influence of policy-based crop effects on the capital factors` input of farmers under different scales and different differentiation types. based on the large sample micro-data from the fixed observation points in Heilongjiang Province from 2009 to 2017, The results show that policy-based crop insurance has a significant negative impact on farmers' per mu chemical fertilizer input. Moreover, the policy-based crop insurance has a significant negative effect on farmers' input of pesticides per mu.