Farmers’ Risk Preferences and Agricultural Weather Index Insurance Uptake in Rural China

Abstract

The purpose of this study is to investigate the effect of farmers’ risk preferences on their decisions to purchase the agricultural weather index insurance based on the evidence from a household survey and field experiments conducted in Yongqiao District, Suzhou City of Anhui Province in China. Our empirical results show that farmers’ risk aversion significantly increases the probability of their decision to buy weather index-based crop insurance. Other factors that significantly influence weather index insurance participation decisions include farmers’ subjective beliefs on the probability of crop losses, farming experience, education level, farm size, and their household income. The empirical results of this study can provide helpful insights for policymakers and local insurers to further improve farmers’ participation in weather index-based crop insurance.

Keywords

China / Farmers’ risk aversion / Risk preference / Weather index insurance

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