Are smallholder farmers willing to pay for different types of crop insurance? An application of labelled choice experiments to Chinese corn growers

Abstract

Crop insurance is the most common agricultural risk management instrument. In developing countries, crop insurance is becoming popular but is often provided with lower coverage, lower premiums and less subsidy than in developed countries. We use a labelled choice experiment method to investigate Chinese smallholder corn growers’ preferences for alternative types of insurance. In addition to traditional yield insurance, we assess farmers’ willingness to pay for coverage levels in price, revenue and weather index insurance, which are currently at the experimental stage in China. We find farmer preferences for these various types of insurance to be heterogeneous. On average, farmers are willing to pay for all types of insurance and for additional coverage but only at the current high subsidy level. We explore heterogeneity in willingness to pay and find that farmers’ positive past insurance experience plays a very important role in their demand for insurance.