Farmers’ Willingness to Purchase Weather Insurance in Rural China

23 Pages Posted: 10 May 2010 Last revised: 28 Mar 2015

See all articles by Calum G. Turvey

Calum G. Turvey

Cornell University - School of Applied Economics and Management

Rong Kong

Northwest Agricultural and Forestry University - College of Economics and Management

Date Written: May 6, 2010

Abstract

China frequently suffers from weather related natural disasters and is a source of wide-spread systemic risk throughout large swaths of China. During these periods farmers crops are at risk and for a largely poor population few can afford the turmoil to livelihoods that goes along with drought. Throughout the developing world there is serious interest in index-based weather insurance for agriculture, and in China the China Insurance Regulatory Commission is investigating the insurability of weather related risk. Beyond that little formal research has appeared on either the demand, use or design of index insurance in China. This paper provides a preliminary assessment of farmers’ willingness to pay for drought insurance. Based on a survey of over 890 farm households in Shaanxi and Gansu provinces the results show that while there is significant demand, price may be an issue. Our results show that the majority of farm households would transition from a no-demand state to a demand state as prices fall. This suggests that in order to gain wide gain adoption there may be a need for governmental intervention.

Keywords: China,weather insurance, drought insurance, Willingness to Pay, WTP

JEL Classification: G22, O13, O53

Suggested Citation

Turvey, Calum G. and Kong, Rong, Farmers’ Willingness to Purchase Weather Insurance in Rural China (May 6, 2010). Available at SSRN: https://ssrn.com/abstract=1601625 or http://dx.doi.org/10.2139/ssrn.1601625

Calum G. Turvey (Contact Author)

Cornell University - School of Applied Economics and Management ( email )

248 Warren Hall
Ithaca, NY 14853
United States

Rong Kong

Northwest Agricultural and Forestry University - College of Economics and Management ( email )

Yangling
China

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