Does Agricultural Insurance Premium Subsidy Benefit the Primary Industry?

Abstract

Whether the agricultural insurance has positive impacts on the primary industry has been debated for decades of years. This paper studies this question based on the policy-based agricultural insurance implementation in 2007 in China. We conduct difference in difference analysis and event study estimation. We find that the premium subsidy policy has significantly positive effects on the primary industry. This policy increases the primary industry production by 1310 yuan per person in the pilot provinces, compared to the non-pilot provinces. Among four sub-industries in the primary industry, the policy mainly affects the agriculture, especially the crops production.