Evaluating Farm-Level Crop Insurance Demand in China: A Double-Bounded Dichotomous Approach

Transcription

1 Journal of Agrcultural Scnc; Vol. 8, No. 3; 2016 ISSN E-ISSN Publshd by Canadan Cntr of Scnc and Educaton Evaluatng Farm-Lvl Crop Insuranc Dmand n Chna: A Doubl-Boundd Dchotomous Approach Ruojn Zhang 1 & Dan Fan 2 1 School of Insuranc, Southwst Unvrsty of Fnanc and Economcs, Chngdu, Chna 2 Economc Rsarch Cntr of Wstrn Chna, Southwst Unvrsty of Fnanc and Economcs, Chngdu, Chna Corrspondnc: Dan Fan, Economc Rsarch Cntr of Wstrn Chna, Southwst Unvrsty of Fnanc and Economcs, Chngdu, Chna. E-mal: rzhang@swuf.du.cn Rcvd: January 10, 2016 Accptd: Fbruary 3, 2016 Onln Publshd: Fbruary 15, 2016 do: /jas.v8n3p10 URL: Abstract In 2007 th Chns Mnstry of Fnanc (CMF) approvd th plot agrcultural nsuranc subsdy program, whch trmndously promotd th growth of th agrcultural nsuranc markt. Howvr th nsuranc adopton rat s stll low comparng to that of dvlopd countrs. Th man objctv of ths papr s to nvstgat factors most nflunc growrs crop nsuranc adopton dcsons. To ths nd, w adopt a doubl-boundd dchotomous choc (DBDC) xprmnt. Ths bddng xprmnt s conductd through xtnsv n-prson ntrvws wth ovr 300 rural housholds n wst Chna, Szchwan provnc. By usng th maxmz lklhood mthod w mprcally stmat th ffcts of factors such as landholdng, ncom and farmng xprnc on th farm-lvl crop nsuranc dmand. Rsults ndcat that th majorty (53 pr cnt) of rc growrs ar wllng to pay a hgh crop nsuranc prmum abov 10 ($ 1.7). On th othr sd, about 23 pr cnt of growrs valu th crop nsuranc blow 2 ($ 0.34). As xpctd, th ffcts of landholdng, ducaton and ncom ar all postv and statstcally sgnfcant. Howvr, houshold sz and farmng xprnc advrsly affct th nsuranc adopton dcsons. Kywords: contngnt valuaton mthod, fld survy, nsuranc subsdy 1. Introducton Th natonal agrcultural nsuranc prmum volum has bn ncrasng stadly n Chna, nttlng t th world s scond largst agrcultural nsuranc markt (World Bank, 2010). For xampl, th prmum volum was stmatd to b $91 mllon n 2005, whch trmndously ncrasd to $2.89 bllon n Ths rcnt xpanson can partally b attrbutd to th plot subsdy program approvd by th Chns Mnstry of Fnanc (CMF) n Th naton-wd program pursus hgh crop nsuranc adopton rat by subsdzng roughly 80 pr cnt of th prmum cost for slctd crop varts. Wth th xpnss b born by cntral and local govrnmnts, th subsdy rat s substantally hghr than th avrag rat for most countrs (World Bank, 2010). Dspt such fforts and progrss, th nsuranc adopton rat has not yt achvd th xpctaton, wth an avrag of 40 pr cnt, and as low as 10 pr cnt n som ntror rural rgons. Thrfor, dtrmnng whch factors most nflunc th farm-lvl dmand s of crtcal mportanc. Undrstandng growrs nsuranc adopton dcsons can b nstrumntal n assstng th dsgn of ffctv subsdy programs. Manwhl, rvalng growrs prfrncs hlps to dntfy th markt potntal and to dsgn comprhnsv ndmnty schms that can b accssbl by rural housholds. Dmographc and producton rlatd factors can substantally nflunc growrs dmand for crop nsuranc. As prvously stablshd, th lvl of busnss rsk (Shrrck, Barry, Ellngr, & Schntky, 2004), rsk atttud (Gndr, Spauldng, Tudor, & Wntr, 2009), farm sz (Goodwn, 1993), xpctd rat of rturn (Gardnr & Kramr, 1986; Cannon & Barntt, 1995) and prmum cost (Gndr t al., 2009) ar all dtrmnants n nsuranc adopton dcsons. Whl n Chna, small landholdng, low ncom lvl and larg houshold sz ar partcularly crucal n xplanng th nsuffcnt dmand. For xampl, World Bank (2007) has pontd out that thr may b a lnk btwn th small landholdng and th low crop nsuranc adopton rat. Howvr, no rcnt study has quantfd such lnkag or ffcts of any othr aformntond varabls. Ths papr contrbuts by pntratng nto th undrlyng barrr of crop nsuranc adopton, whch s hypothszd to b assocatd wth 10

2 Journal of Agrcultural Scnc Vol. 8, No. 3; 2016 th undsrabl faturs of Chna s rural conoms. Rcnt studs admnstrd fld survy and hav found that nsuranc prc (Kong, 2011), growrs knowldg and trust of nsuranc company (Boyd, Pa, Zhang, H. H. Wang, & K. Wang, 2011) mattr substantally for agrcultural nsuranc adopton n Chna. Ths papr adds to th xstng ltratur by conductng a sophstcatd contngnt valuaton (CV) choc xprmnt n wst rural Chna, whch rvals farm-lvl dmand for crop nsuranc. Ths study contrbuts n conductng xtnsv ntrvws and hom vstng wth ovr 300 rural housholds, documntng n dtal growrs producton nformaton, rsk managmnt mthods, prfrncs and atttuds. Th n-dpth ntrvw rvals th potntal barrr s lkly to b assocatd wth th undsrabl producton faturs n rural Chna, such as small landholdng, low ncom lvl and larg houshold sz. Th analyss of ths study rls on th contngnt valuaton (CV) mthod. Th CV mthod has bn commonly adoptd for rvalng consumr s dmand and th wllngnss to pay (WTP). Zhang, Gallardo, McClusky, and Kupfrman (2010) adoptd th CV mthod and lctd consumr s wllng to pay for Anjou pars by a dchotomous-choc dsgnd qustonnar. McClusky, Mttlhammr, Marn, and Wrght (2007) utlzd th CV mthod to quantfy consumr s dmand for Washngton Stat Gala appls. Hobbs, Sandrson and Haghr (2006) dvlopd th CV mthod through an xprmntal aucton to lct consumr s choc btwn bson products and bf products. Yamazak, Rust, Jnnngs, Lyl, and Frjlnk (2013) conductd a CV study n ach of two Tasmanan fshrs that stmatd th valu of day s rcratonal fshng. Snc crop nsuranc can b vwd as fnancal commodty, ths markt-typ xprmnts may also b appld. In fact, svral rcnt studs hav appld th CV approach to valuat dmand and th WTP for halth nsuranc. Dong, Kouyat, Carns, Mugsha, and Saurborn (2004) collctd data from a houshold survy and studd th WTP for a proposd communty-basd halth nsuranc schm. Mathyazhagan (1998) conductd th CV study n Inda and found that soco-conomc factors and physcal accssblty to halth srvcs wr sgnfcant dtrmnants of wllngnss to pay for a vabl rural halth nsuranc schm. Asgary, Wlls, Taghva, and Rafan (2004) analyzd farmrs WTP for halth nsuranc n Iran and concludd that govrnmnt subsdy was ncssary as th avrag WTP was lowr than th avrag prmum. Barnghausn, Lu, Zhang, and Saurborn (2007) also analyzd Chns workrs WTP for socal halth nsuranc but found th WTP s hghr than th cost. To th bst of our knowldg, fw studs adoptd th CV mthod to rval rural growrs dmand for crop nsuranc n Chna. Ths study ntnts to brdgs ths gap. CV study can b conductd through dffrnt xprmntal dsgns, such as dynamc fld xprmnt (Col, Stn, & Tobacman, 2014), tratv bddng gam (Asgary t al., 2004) and paymnt card format (Barnghausn, Lu, Zhang, & Saurborn, 2007). Among ths mthods, th doubl-boundd dchotomous chocs (DBDC) s th most commonly usd. Ths study utlzs a DBDC xprmnt, for th rason that th DBDC dsgn can asly ncorporat dffrnt nsuranc subsdy rats. In addton, th DBDC xprmnt can b convnntly conductd through n-prson survy and hom vstng. Qustons ar askd whr a postv rspons to th ntal bd lads to a scond valuaton quston n whch a stp-up bd amount s gvn. Whl a ngatv rspons rsults n a stp-down bd amount n th follow-up quston. By askng rspondnts th follow-up valuaton quston, th statstcal ffcncy of th stmats basd on a sngl dchotomous choc quston can b mprovd (Hanmann & Kannnn, 1991). Havng stablshd th background and ratonal for ths papr, t procds nxt wth structur as follows. Nxt scton motvats th thortcal framwork of doubl-boundd dchotomous choc (DBDC) mthodology, and th corrspondng conomtrc spcfcatons. Thn th survy and data collcton mthods ar dscrbd. Fnally mprcal rsults ar provdd. Th papr nds wth conclusons. 2. Mthodology: Doubl-Boundd Dchotomous Choc (DBDC) Th contngnt valuaton (CV) mthod s commonly usd to lct consumr s dmand through a dchotomous-choc qustonng format. Spcfcally, ths study adopts doubl-boundd dchotomous choc (DBDC) approach to rval Chns rc growrs dmand for crop nsuranc. Each partcpatng growr s prsntd wth two conscutv bds. Th lvl of th scond bd s contngnt upon th rspons of th frst bd. Spcfcally, th frst bd provds growr an ntal hypothtcal nsuranc prmum of b2 and asks f h would lk to purchas th nsuranc. If th rspons s ys thn a stp-up prmum b1 (.. a lowr subsdy) s offrd n th scond bd. If th rspons s no n th frst bd, a stp-down prmum b3 (.. a hghr subsdy) s offrd n th follow-up bd. Consquntly, four outcoms rsult accordng to th rsponss from both bds: (1) ys/ys for growr whos tru prvat valu (wllngnss to pay) s n th ntrval [b1, + ), (2) ys/no for growr whos tru valu s n th [b2, b1), (3) no/ys for growr whos tru valu s n th [b3, b2), and (4) no/no for growr whos tru 11

3 Journal of Agrcultural Scnc Vol. 8, No. 3; 2016 valu s n (, b3). Lt V dnots growr s tru wllngnss to pay for th crop nsuranc. Th catgory of th obsrvd rsponss from th two-round bddng procss s rprsntd by: 1, f V b3 (1) 2, f b3 V b2 y 3, f b2 V b1 4, f V b1 Whr, y 1, 2, 3, 4 ndcats th obsrvd dscrt outcoms for no/no, no/ys, ys/no, ys/ys. Durng th ntrvw, hypothtcal qustons wr offrd n aformntond doubl-boundd bddng format. Partcpatng growrs wr advsd that th gross prmum s 20/mu and potntal ndmnty s 400/mu. Thn th frst round offrd an ntal bd prmum of 4/mu ($0.67/mu) (b 2 ), whch was at th currnt subsdy rat of 80 pr cnt. In th scond round growrs who answrd ys wr offrd a hghr prmum of 10/mu ($1.67/mu) (b 1 ), thus a lowr subsdy of 50 pr cnt. Growrs who answrd no wr offrd a lowr prmum of 2/mu ($0.33/mu) (b 3 ), and thus a hghr subsdy of 90 pr cnt. Th undrlyng latnt prvat valu V s spcfd lnarly as, V b Z, 1,..., n (2) Whr, Z s a vctor of growr s common dmographc varabls such as gndr, ducaton lvls and ncom. In addton, b s th ultmat bddng prmum offrd to growr (b can b b 1, b 2 or b 3 ). ε s a random varabl accountng for nos, ncludng possbly unobsrvabl factors and charactrstcs affctng th dcson. Thus unknown paramtrs to b stmatd ar β and α. Assumng th rror trms ar ndpndntly dntcally dstrbutd (..d.) and follow a logt dstrbuton wth th cumulatv dstrbuton functon dfnd as G( ). Th choc probablty for ach ndvdual can b xprssd as: b3 Z Pry 1 G b3 Z, 3 1 b Z b2 Z b3 Z (3) Pry 2 G b2 Z G b3 Z, b2 Z b3 Z 1 1 b1 Z b2 Z Pry 3 G b1 Z G b2 Z, b1 Z b2 Z 1 1 b1 Z Pry 4 1 G b1 Z b Z Whr, for xampl, th probablty of choosng no/no (obsrvd y = 1) rvals growr s prfrnc ovr all othr choc catgors, whch s th standard logstc dstrbuton. In ths cas th growr facs th ultmat bd amount 2/mu ($0.33/mu) (b 3 ). Th probablty of choosng no/ys (y = 2) s th dffrnc btwn two cumulatv dnsts of choosng no/ys (y = 2) and choosng no/no (y = 1). Smlarly, th probablty of choosng ys/no (y = 3),.., facng th ultmat bd amount b 1 of 10/mu ($1.67/mu), can b vwd as th dffrnc btwn two cumulatv dnsts of choosng ys/no (y = 3) and choosng no/ys (y = 2). Not that th probablts n Equaton (3) must sum to on. It follows th log-lklhood functon s, I y 1 ln Gb3 Z I y 2 ln Gb2 Z 3 G b Z (4) ln L I y 3 ln Gb1 Z 2 G b Z I y 4 ln 1 Gb1 Z Whr, I Y=j s an ndcator varabl corrspondng to th catgory for th obsrvd rsponss. Th modl was stmatd by maxmum lklhood whch s th commonly usd approach. Th standard rrors wr stmatd by th robust covaranc matrx to mprov th consstncy (Hubr, 1967; Wht, 1982). Th stmaton was conductd by GAUSS usng th Nwton-Raphson (NR) algorthm. Th mprcal spcfcaton of Equaton (2) s, V1 0 Bd 1Sz 2Land 3Edu 4Exp 5Inc 6Loss 7Gndr (5) Whr, Bd = th ultmat bddng nsuranc prmum offrd to growr ; Sz = houshold sz, masurd by th numbr of prsons pr houshold; 12

4 Journal of Agrcultural Scnc Vol. 8, No. 3; 2016 Land = land holdngs pr houshold, n mu; Edu = dscrt ducaton lvl of th houshold had; Exp = farmng xprnc of th houshold had, masurd by yars; Inc = total ncom, ncludng farm ncom and nonfarm ncom; Loss = bnary dscrt varabl ndcatng th vnt of crop loss; Gndr = gndr of th houshold had. As dscussd blow, th varabl bd taks thr possbl valus dpndng on growrs chocs n th bddng xprmnt. It quals 10/mu ($1.67/mu) (b 1 ), 4/mu ($0.67/mu) (b 2 ), or 2/mu ($0.33/mu) (b 3 ), as dscrbd n Equatons (3) and (4). Smlarly, th varabl loss taks only two possbl valus, qualng 1 whn thr was crop loss wthn th last two yars, and 0 othrws. Th varabls du and gndr ar dscrt whch ar smlarly dfnd as n othr ltratur (Zhang t al., 2010; McClusky t al., 2007). Th varabls sz, land and xp ar all contnuous. On may rasonably xpct bd to b ngatvly assocatd wth growr s wllngnss to pay. Bcaus growrs ar mor lkly to buy th crop nsuranc f t s offrd at a lowr prc, an ncras n bd prmum rducs th lklhood of purchas. In addton, on may rasonably assrt that hghr lvl of landholdngs, ducaton and total ncom would all lad to hghr wllngnss to purchas. Morovr, f a crop loss occurrd prvously, growr s mor lkly to rval a hghr dmand for th nsuranc. Thus th sgns of α 2, α 3, α 5, α 6 ar xpctd to b postv. Howvr, th drct ffcts of farmng xprnc (α 4 ) and houshold sz (α 1 ) ar ambguous. In Chna, long yars of farmng actvts and larg rural famly ar mor lkly to rduc th ncntvs for nsuranc purchas. Possbl rason could b growrs ar mor lkly to rly on thr common-sns xprnc than scntfc mthods to cop wth producton rsks. In addton, largr houshold sz rducs th dsposabl ncom pr capta, thus rducs th consumptons ncludng crop nsuranc purchas. Th modl was also stmatd altrnatvly by ncorporatng ntractv trms whr, V1 0 Bd 1Sz 2Land 3Edu 4Exp 5Inc 6Loss (6) 7Gndr 8Inc Land9Inc Edu10Inc Exp In Equaton (6) Inc Land rprsnts th ntractv ffct btwn ncom and land holdng. W xpct that growrs tnd to hav hghr dmand wth a hgh ncom lvl as landholdng ncrass. In addton, Inc Edu s th ntractv trm of ncom and ducaton. Th trm Inc Exp ndcats that th ffcts of ncom may also dpnd on farmng xprncs. 3. Data 3.1 A Background Ovrvw Agrcultural nsuranc provson s largly domnatd by crop nsuranc. Wth rspct to th global agrcultural nsuranc markt, for xampl, ovr 90 pr cnt of th agrcultural nsuranc busnss by prmum volum coms from crop nsuranc (Th World Bank, 2010). In fact, Chna s crop nsuranc markt rmand undvlopd untl th lat 1970s. Mor attnton and rsarch wr rcvd aftrwards. Th frst ntrnatonal crop nsuranc confrnc hld n Chna n 1994 s a mlston, ladng polcymakrs to mbark on an ntatv of a naton-wd subsdy program. Th da of subsdzng, howvr, was stll not matralzd untl th plot subsdy program 2007, whch covrs major gran and olsd crops ncludng corn, what and soybans, and accounts for about thr-quartrs of th croplands. Th program largly asssts rural housholds productons and lvs. Th survy was conductd n Szchwan provnc whch has a total populaton of 91 mllon wth 51 pr cnt mal, 48 pr cnt fmal, 71 pr cnt rural populaton and pr cnt agd populaton (popl abov 65) (2014 Statstcal Yarbook). Szchwan provnc blongs to th Southwst rc producton ara. Agrcultural producton substantally contrbuts to socal and conomc growth. In 2013 agrcultural producton accountd for 13 pr cnt of th total GDP (2014 Statstcal Yarbook). As ovr 90 pr cnt of th populaton fd by rc, rc producton accountd for 30 pr cnt of th total food crop producton. Snc 2007, Szchwan provnc s assgnd to b on of th agrcultural nsuranc plot provncs. Aftrwards, th growth of agrcultural nsuranc markt hav bn trmndous. In 2014 th nsuranc prmum volum ncrasd to 2.74 bllon yuan, whch s 2 pr cnt hghr than last yar. A govrnmnt subsdy of 2.1 bllon yuan was provdd to lvn crop varts ncludng rc, corn, hog, rapsds and potatos. About 3.79 mllon rural housholds partcpatd n th nsuranc program and 2.5 mllon hav succssfully rcvd ndmnty. In 13

5 Journal of Agrcultural Scnc Vol. 8, No. 3; 2016 addton, nsuranc nnovaton such as prc ndx nsuranc hav bn plotd n svral cts n Szchwan. 3.2 Th Survy Th survy nstrumnt usd n ths study was a structurd qustonnar whch was composd of four parts: Th rc growrs dmographc nformaton; th agrcultural producton nformaton; th crop nsuranc purchas nformaton; and th DBDC xprmnt. In-dpth survy was admnstrd by hom vstng n mddl plans n Szchwan provnc n Chna. Th plot survy was conductd n Octobr, Th survy qustonnar was thn modfd and polshd basd on collctd nformaton. Th man and th follow-up survy wr admnstrd throughout 3 months n th wntr of 2014 and th bgnnng of A total numbr of 350 rural housholds hav bn vstd and ntrvwd. Ths housholds wr chosn from 8 vllags n 4 slctd towns. Tabl 1 provds gnral gographc attrbuts for ach survy st. Th avrag vllag populaton s 2,200. Th avrag rrgatd lands ar 1,572 (mu) and th avrag annual ncom pr capta s 7,000 yuan. Th avrag adopton rat of agrcultural nsuranc for ach vllag s 72.2 pr cnt for what, 38.9 pr cnt for vgtabls and 61.1 pr cnt for th corn. Tabl 1. Gographc attrbuts for ach survy st, Szchwan provnc, Chna Town Vllag Populaton (1000) Total Crop Land (mu) Annual Incom pr Capta (2013) Irrgatd Land Non-rrgatd Land (1000 Yuan) BL HY GY ML LH GY LY LS GY SK ZS LS Not. 1 mu = hctars, 1 = $ BL, ML, GY and SK dnot nams for ach town. Smlarly th scond column dnots nams for ach vllag. Sourc: Author s calculaton basd on 2014 Dmographcs Rport, Szchwan Provnc, Rsarch Cntr of Economc Dvlopmnt n Wst Chna, Southwst Unvrsty of Fnanc and Economcs. To mnmz potntal slcton bas housholds wr chosn wth th facltaton of vllag ladrs, local agrcultural corporatv and opn markts. Eght graduat studnts from conomcs major wr hrd and trand to conduct th ntrvws. Each ntrvw took mnuts. An ncntv of houshold clanng matrals valud 12 ($2) was offrd to growrs upon complton. In ordr to control rspons bas partcpators wr also nstructd n advanc that th nformaton s only usd confdntally for unvrsty rsarch. 3.3 Data Dscrptons and Summary Statstcs Mssng ky nformaton and ncomplton ar rsultd du to som growrs lack of coopraton. Fnally 302 qustonnars wr nd up n th sampl analyzd, wth th complton rat of 86 pr cnt. Tabl 2 assmbls summary statstcs of th man socodmographc varabls. Th avrag houshold sz s 4 popl, whch s lkly to b structurd as on grandparnt, two parnts and on chld. Th majorty of ntrvwd growrs wr mal (76 pr cnt). Most of th partcpators fnshd lmntary (45 pr cnt) or junor hgh dgr (43 pr cnt). Th man of farmng yars s 38 yars, about 75 pr cnt of growrs hav famng xprnc longr than 30 yars. Th data rvals, as t s wll notd, th populaton agng problm and rural-urban labor mmgraton phnomnon ar sgnfcant n rural Chna. Th avrag landholdngs s 3.48 mu pr houshold. About 79 pr cnt of rural houshold hav landholdngs lss than 3 mu (0.2 hctars) (Not 1). Ths agan rvals that agrcultural producton n rural Chna s domnatd by margnal rural housholds. About 40 pr cnt of growrs ndcatd that thy hav xprncd crop loss n th last two yars. Th man of total pr capta monthly ncom s 918 ($153). 14

6 Journal of Agrcultural Scnc Vol. 8, No. 3; 2016 Tabl 2. Summary statstcs for dmographc varabls, rural houshold, Chna Varabl Dscrpton Prcntag (%) Man Std. Dv. Mn. Max. Gndr = 0 f fmal = 1 f mal Exprnc Yars of farmng < > Houshold sz Educaton 1 = no ducaton = lmntary school = junor hgh > 4 abov hgh school 6.34 Lands (mu) Agrcultural Lands prhoushold < > Total Monthly Incom pr Capta ( ) < > Evnt of Crop Loss = ys = no Not. 1 mu = hctars; 1 = $ Farmng yar was rportd by usng ag subtractd by 16 (for consstncy assumng farmng actvty starts at 16 yars old). Th choc xprmnt was conductd n th last scton of th ntrvw. As dscussd, hypothtcal qustons wr offrd n a doubl-boundd bddng format. It s assumd th gross prmum s 20/mu and potntal ndmnty s 400/mu. Thn th frst round offrd an ntal bd prmum of 4/mu ($0.67/mu), whch was accordng to th currnt subsdy rat of 80 pr cnt. In th scond round growrs who answrd ys wr offrd a hghr prmum of 10/mu ($1.67/mu), thus a lowr subsdy of 50 pr cnt. Growrs who answrd no wr offrd a lowr prmum of 2/mu ($0.33/mu), and a hghr subsdy of 90 pr cnt. To plac abov valuaton qustons wthn th contxt of agrcultural actvts and crop nsuranc purchas, partcpatng growrs wr frst askd about thr annual rc harvst, th rgular agrcultural actvts and famly monthly xpnss. Dtals survy nformaton ar provdd n Appndx A. Th dchotomous choc valuaton qustons wr thn askd as blow: Barng n mnd that th potntal ndmnty s 400/mu, f t had cost you of 4/mu on crop nsuranc, would you wllng to buy t nxt yar? (Q1) Barng n mnd that th potntal ndmnty s 400/mu, f t had cost you of 10/mu on crop nsuranc, would you wllng to buy t nxt yar? (Q2) Barng n mnd that th potntal ndmnty s 400/mu, f t had cost you of 2/mu on crop nsuranc, would you wllng to buy t nxt yar? (Q3) Th abov qustons wr askd doubl-boundd bddng procdur n Chns. Thy ar translatd ln by ln to b dpctd n th papr for th purpos of llustraton. 15

7 Journal of Agrcultural Scnc Vol. 8, No. 3; 2016 Tabl 3 prsnts th obsrvd dstrbuton of growrs rsponss to th two conscutv bd offrs. Th majorty (53 pr cnt) ar wllng to pay a hgh nsuranc prmum abov 10 (about $ 1.7). On th othr sd, about 23 pr cnt of growrs hav low prvat valus about crop nsuranc blow 2 ($ 0.34). Only 3 pr cnt of growrs valu crop nsuranc n th catgory of [ 2, 4). Thr s about 11 pr cnt of growrs wllngnss to pay closd to th currnt prmum prc, whch s n th ntrval of [ 4, 10). Most growrs ndcatd that thy ar wllng to pay a hgh prc for crop nsuranc as long as thy could rcv ndmnty succssfully n th cas of crop loss. On avrag, th WTP s hghr than th currnt nsuranc prmum. Th poltcal mplcaton s that Chns govrnmnt may consdr to shft th polcy focus from solly ncrasng th subsdy rat towards strngthnng th fnancal suprvson and montor n nsuranc ndmnty procss. Tabl 3. Dstrbuton of rspondnts n ach bddng catgory Catgory Rspons Obsrvatons Frquncy (%) (,?) no/no [ 2, 4) no/ys [ 4, 10) ys/no [ 10, + ) ys/ys Not. 1 = $ Tabl 4 provds and compars data of rsponss n ach scond round bd. For th scond round dscount bd, th prcntag of mal s for thos who chos no/no, t s pr cnt for thos who chos no/ys. Th dffrnc btwn th gndr proportons for ths two groups was tstd wth th 95 pr cnt confdnc ntrval provdd. At lvl 0.05, th dffrnc s not statstcally sgnfcant. Thus th proporton of mal n th no/no groups s not sgnfcantly dffrnt from that n th no/ys group. Howvr, rsults ar mor llustratv whn w look at th scond round prmum bd. Th dffrnc n gndr proporton s sgnfcant (p-valu = 0.000; confdnc ntrval [0.38,0.70]), mplyng that mn ar mor lkly to rspond ys/no than ys/ys. Tabl 4. Dstrbuton of rsponss to scond round dscount/prmum bd Varabls Dscount bd Prmum bd NO YES 95%Δ C.I. NO YES 95%Δ C.I. Prcntag of Mal (%) [-0.44,0.29] [0.38,0.70]*** Man of ncom [224.52,547.13] [ ,10.17]* Man of landholdng [-1.39,0.43] [-5.27,2.13] Man of Exprnc [-8.30,8.89] [-5.82,0.54] Man of houshold sz [-0.31,0.83] [-0.12,0.74] Not. *, **, *** ndcat statstcal sgnfcanc at 10%, 5% and 1% lvls, rspctvly. Group mans ar also sgnfcantly dffrnt n th scond round prmum bd at lvl 0.1, mplyng that man of ncom for th group who answrd ys/no s sgnfcantly lowr than thos who chos ys/ys. Smlarly, mans of landholdng, xprnc and houshold sz wr also compard btwn dscount bd groups no/no and no/ys, and compard btwn prmum bd groups ys/no and ys/ys. Rsults ddn t ndcat any sgnfcant dffrncs. 4. Rsults Th ffcts of dmographc varabls on growrs dmand for crop nsuranc ar mprcally xplord. Tabl 5 assmbls rsults of maxmum log-lklhood stmats for both Equatons (5) and (6) (wth covarats). For varabl ncom, stmatons of both modls suggst a postv rlatonshp sgnfcant at 0.01 (Modl I: 4.7, p-valu = 0.00; Modl II: 0.84, p-valu = 0.00). Ths rsults ar consstnt wth th xpctatons. Th drct ffct from ncom s postv, mplyng growrs ar mor lkly to buy th crop nsuranc gvn a hghr 16

8 Journal of Agrcultural Scnc Vol. 8, No. 3; 2016 ncom. Possbl xplanaton could b that largr dsposabl ncom ncrass th ncntv for all consumptons ncludng crop nsuranc. In addton, postv gndr ffct s also obtand n both modls (Modl I: 8.43, p-valu = 0.21; Modl II: 1.13, p-valu = 0.00), ndcatng mn ar mor lkly to purchas nsuranc than womn. Whl Modl I shows a sgnfcantly postv ffct of ducaton (coffcnt: 6.59, p-valu = 0.00) whch s consstnt wth xpctaton, modl II ndcats a contrarly ngatv ffct (coffcnt: -0.9, p-valu = 0.07). As dscussd, th drct ffct of ducaton s mor lkly to b postv. A bttr ducatd growr s mor lkly to undrstand th rol of crop nsuranc n agrcultural producton. Nxt w prsnt rsults for ach varabl of th bd, houshold sz, farmng xprnc, landholdng and loss. Tabl 5. Coffcnt stmats of Log-Lklhood modl Varabls Modl I (wthout covarats) (Equaton 5) Modl II (wth covarats) (Equaton 6) coffcnt robust s.. coffcnt robust s.. Intrcpt -1.83*** *** Bd -3.89** ** Houshold sz -1.19*** Landholdng 0.10*** *** Educaton 6.59*** Exprnc -1.48*** ** Incom 4.70*** *** Loss 3.68*** Gndr *** Incom_Landholdng -1.64*** Incom_Educaton 1.39*** Incom_Farmng 0.36*** Log lklhood Lklhood Rato Tst Not. *, **, *** ndcat statstcal sgnfcanc at 10%, 5% and 1% lvls, rspctvly. Th Bd dnots th nsuranc prmum offrd to growrs. It taks valus of 2, 4 and 10. Th sgns of th coffcnts for Bd ar ngatv n both modls and ar statstcally sgnfcant at 0.05(Modl I: -3.89, p-valu = 0.04; Modl II: -4.13, p-valu = 0.03). Th sgns ar xpctd bcaus growrs ar mor lkly to buy th crop nsuranc f t s offrd at a lowr prmum prc. Th rsults mply that nsuranc prc mattrs substantally for nsuranc adopton, whch s consstnt wth fndngs n Kong t al. (2011). Howvr, t may as wll b notd that th prc lastcty mght b low gvn a suffcntly low prmum. Consquntly, whn th prmum s at a vry low lvl, furthr rducton may not ncras th nsuranc dmand substantally. Th varabl Houshold sz s masurd by th numbr of prsons pr houshold. Rsults from both modls ndcat that th houshold sz s ngatvly assocatd wth th dmand (Modl I: -1.19, p-valu = 0.00; Modl II: -0.71, p-valu = 0.16). Thus a largr houshold sz s lkly to rduc th lklhood of crop nsuranc purchas. For largr famly, th dsposabl ncom pr capta s smallr, ladng to a lowr dmand for crop nsuranc. In addton, th coffcnt n Modl I s sgnfcant at 0.01, mplyng that Houshold sz s an mportant varabl n xplanng th crop nsuranc adopton dcsons. Intrstngly that farmng xprnc has a sgnfcant ngatv ffct obtand by both modls (Modl I: -1.48, p-valu = 0.00; Modl II: -1.05, p-valu = 0.03). On possbl xplanaton s that a sophstcatd and xprncd growr s lkly to b ovrconfdnt and rly on hs common-sns xprnc nstad of scntfc mthods n copng wth producton rsks. Convrsly, h may as wll spnd costly amounts of rsourcs on othr xstng rsk managmnt altrnatvs, rlatv to crop nsuranc. Th ffct of varabl Landholdng s ambguous and controvrsal (Modl I: 0.1, p-valu = 0.00; Modl II: -0.98, 17

9 Journal of Agrcultural Scnc Vol. 8, No. 3; 2016 p-valu = 0.00). Th sgns do not agr wth ach othr but both ar statstcally sgnfcant at 0.01 lvl. Consquntly, Modl I ndcats that an ncras n landholdngs ncrass th dmand but Modl II obtans a contrary ffct. Th xplanaton n th currnt papr lans towards Modl I s rsults, mphaszng th postv ffcts of landholdngs on crop nsuranc purchas. Rural Chna s domnatd by margnal agrcultural producrs. Ths fatur s a crucal dtrmnant n xplanng th nsuffcnt nsuranc dmand. Bcaus growrs may not suffr substantal ncom rducton n cas of crop loss, thy may b gnorant of th mportanc of crop nsuranc. On th othr sd, govrnmnt subsdy may not b ffctv du to th small landholdng. Ths fact s rflctd n Tabl 3 whr most growrs xprssd that thy ar wllng to pay a hgh prc, as ncrasng th nsuranc prmum may not cost thm too much du to th small amount of lands. Small landholdng rducs th producton ffcncy and prvnts th achvmnt of conoms of scal. Chns govrnmnt, n rspons to ths dsadvantag, ncourags th land corporatv whr growrs ar abl to pool thr croplands. In many othr dvlopng countrs, farmrs ar also allowd to transfr thr land ownrshp, whch lads to hgh land concntraton. Growrs who oprat wth larg land acrs may b mor lkly to hav a hgh crop nsuranc dmand. Thus an ncras n landholdng ncrass th wllngnss to purchas. As xpctd, both modls show a postv coffcnt of varabl Loss (Modl I: 3.68, p-valu = 0.00; Modl II: 1.85, p-valu = 0.12). Th coffcnt s sgnfcant at 0.01 n Modl I. Thus t ndcats that prvous xprnc of crop loss ncrass th wllngnss to pay. Ths s bcaus growrs who hav xprncd crop loss bfor ar lkly to b mor awar of th mportanc of crop nsuranc, thus ar mor wllng to purchas. Ths s consstnt wth rsults ndcatd n Tabl 5 whr most growrs vwd rcvng ndmnty as th most mportant factor nfluncng nsuranc purchas. Th stmatd ntractv ffcts ar as follows. Th coffcnt for (Inc Land ) s ngatv and sgnfcant at 0.01 (coffcnt: -1.64, p-valu = 0.00). Thus growrs tnd to hav lowr dmand wth a hgh ncom lvl as landholdng ncrass. In addton, th coffcnt for (Inc Edu ) s postv and sgnfcant at 0.01 (coffcnt: 1.39, p-valu = 0.00), mplyng growrs tnd to hav hghr wllngnss to pay wth a hgh ncom lvl as thy rcv mor ducaton. Th coffcnt for th trm (Inc Exp ) s postv and sgnfcant at 0.01 (coffcnt: 0.36, p-valu = 0.00), ndcatng that th growrs tnd to hav hghr dmand wth a hgh ncom lvl as farmng xprnc ncrass. 5. Concluson Ths study conductd xtnsv n-prson ntrvws and hom vstng wth ovr 300 rural housholds n wst Chna. It rvald that majorty of rc growrs wr wllng to pay a hgh crop nsuranc prmum, mplyng that Chns govrnmnt may consdr to shft th polcy focus from solly ncrasng th subsdy rat towards strngthnng th fnancal suprvson and montor n nsuranc ndmnty procss. Th n-dpth ntrvw rvald th potntal barrrs du to th undsrabl producton faturs n rural Chna, such as small landholdng, low ncom lvl and larg houshold sz. It was found that houshold sz, farmng xprnc advrsly affct th nsuranc adopton dcsons. Morovr, th ffcts from landholdng, ducaton and ncom ar all postv and statstcally sgnfcant. Th fndngs of ths study can b provdd to nsuranc compans and polcy makrs who ar attmptng to undrstand th factors rlatd to crop nsuranc adopton n Chna, n th hop to ncourag th us of crop nsuranc. Undrstandng farm-lvl nsuranc dmand can b nstrumntal n assstng th dsgn of ffctv subsdy mchansm. Morovr, stmatng growrs prfrncs can b usful n dntfyng th nsuranc markt potntals. Th study also rvald th mportanc of dsgnng comprhnsv ndmnty schms that can b accssbl by small rural housholds. Acknowldgmnts Th rsarch s supportd by th Fundamntal Rsarch Funds for th Cntral Unvrsts. Rfrncs Ataguba, L., Ichoku, E. H., Fonta, W., Okpanach, A., & Okon, U. (2006). An stmaton of th wllngnss to pay for communty halthcar rsk-sharng prpaymnt schm and th mdcal povrty trap: Evdnc from rural Ngra. 5 th Povrty and Economcs polcy Rsarch Ntwork Gnral Mtng, Adds Ababa, Ethopa. 18

10 Journal of Agrcultural Scnc Vol. 8, No. 3; 2016 Asgary, A., Wlls, K., Taghva, A. A., & Rafan, M. (2004). Estmatng rural housholds wllngnss to pay for halth nsuranc. Europan Journal of Halth Economcs, 5, Boyd, M., Pa, J., Zhang, Q., Wang, H. H., & Wang, K. (2011). Factors affctng crop nsuranc purchas n Chna: Th Innr Mongola rgon. Chna Agrcultural Economc Rvw, 3(4), Barnghausn, T., Lu, Y., Zhang, X., & Saurborn, R. (2007). Wllngnss to pay for socal halth nsuranc among nformal sctor workrs n Wuhan, Chna: A contngnt valuaton study. BMC Halth Srvcs Rsarch, 7, Col, S., Stn, D., & Tobacman, J. (2014). Dynamc of dmand for ndx nsuranc: vdnc from a long-run fld xprmnt. Th Amrcan Economc Rvw, 104(5), Cannon, D. L., & Barntt, B. J. (1995). Modlng changs n th dfrral multpl prl crop nsuranc program btwn 1982 and Th Amrcan Agrcultural Economcs Assocaton Annual Mtngs, Indanapols, IL. Dong, H., Kouyat, B., Carns, J., Mugsha, F., & Saurborn, R. (2003). Wllngnss-to-pay for communty-basd nsuranc n Burkna Faso. Halth Economcs, 12, Gndr, M., Spauldng, A. D., Tudor, K. W., & Wntr, J. R. (2009). Factors affctng crop nsuranc purchas dcsons by farmrs n northrn Illnos. Agrcultural Fnanc Rvw, 69(1), Gardnr, B. L., & Kramr, R. A. (1986). Th Untd Stats: Crop Insuranc for Agrcultural Dvlopmnt: Issus and Exprnc. Johns Hopkns Unvrsty Prss, Baltmor, MD. Goodwn, B. K. (1993). An mprcal analyss of th dmand for crop nsuranc. Amrcan Journal of Agrcultural Economcs, 75, Hobbs, J. E., Sandrson, K., & Haghr, M. (2007). Evaluatng Wllngnss-to-Pay for Bson Attrbuts: An Exprmntal Aucton Approach. Canadan Journal of Agrcultural Economcs, 54(2), Hubr, P. J. (1967). Th bhavor of maxmum lklhood stmaton undr nonstandard condtons. In L. M. Lcam & J. Nyman (Eds.), Procdngs of th 5th Brkly Symposum on Mathmatcal Statstcs and Probablty, Unvrsty of Calforna Prss. Hanmann, W. M., & Kannnn, B. (1999). Valung Envronmntal Prfrncs: Thory and Practc of th Contngnt Valuaton Mthod n th U.S., E.U. and Dvlopng Countrs (pp ). In I. J. Batman & K. G. Wlls (Eds.). London: Oxford Unvrsty Prss. Kong, R. (2011). Factors nfluncng Shaanx and Gansu farmrs wllngnss to purchas wathr nsuranc. Chna Agrcultural Economc Rvw, 3(4), Kngtht, T. O., & Cobl, K. H. (1997). Survy of U.S. multpl prl crop nsuranc ltratur snc Rvw of Agrcultural Economcs, 19, McClusky, J. J., Mttlhammr, R. C., Marn, A. B., & Wrght, K. S. (2007). Effct of Eatng-Qualty Charactrstcs on Consumrs Wllngnss to Pay for Gala Appls. Canadan Journal of Agrcultur and Rsourcs Economcs, 55, Mahul, O., & Stutly, C. J. (2010). Govrnmnt support to agrcultural nsuranc challngs and optons for dvlopng countrs. Th Intrnatonal Bank for Rconstructon and Dvlopmnt, Th World Bank, Washngton DC. Mathyazhagan, K. (1998). Wllngnss to pay for rural halth nsuranc through communty partcpaton n Inda. Intrnatonal Journal of Halth Plan Manag, 13, Shrrck, B. J., Barry, P. J., Ellngr, P. N., & Schntky, G. D. (2004). Factors nfluncng farmrs crop nsuranc dcsons. Amrcan Journal of Agrcultural Economcs, 86(1),

11 Journal of Agrcultural Scnc Vol. 8, No. 3; 2016 Wht, H. (1982). Maxmum lklhood stmaton of msspcfd modls. Economtrca, 50, Yamazak, S., Rust, S., Jnnngs, S., Lyl, J., & Frjlnk, S. (2013). Valung rcratonal fshng n Tasmana and assssmnt of rspons bas n contngnt valuaton. Th Australan Journal of Agrcultural and Rsourc Economcs, 57, Zhang, H., Gallardo, R. K., McClusky, J. J., & Kupfrman, E. M. (2010). Consumrs wllngnss to pay for tratmnt-nducd qualty attrbuts n Anjou pars. Journal of Agrcultural and Rsourc Economcs, 35(1), Th World Bank. (2007). Chna: Innovatons n Agrcultural Insuranc-Promotng Accss to Agrcultural Insuranc for Small Farmrs. Sustanabl Dvlopmnt, East Asa and Pacfc Rgon Fnanc and Prvat Sctor Dvlopmnt, Th World Bank, Washngton DC. Nots Not 1. Agrcultural lands pr capta s 0.37 mu n 2013 (2014 Schuan Statstcal Yarbook). Copyrghts Copyrght for ths artcl s rtand by th author(s), wth frst publcaton rghts grantd to th journal. Ths s an opn-accss artcl dstrbutd undr th trms and condtons of th Cratv Commons Attrbuton lcns ( 20