The Influence of the Peer Effect on Farmers’ Agricultural Insurance Decision: Evidence from the Survey Data of the Karst Region in China

Abstract

Low insurance participation rate and low willingness to insure among farmers have always been major problems in the sustainable development of agricultural insurance in China. This paper attempts to examine the peer effect on farmers’ agricultural insurance buying decisions and explore its mechanism. We have established an IVprobit model, using the survey data of 9452 farmers in the karst regions in China. The empirical results show that: (1) Peer effect has a significant influence on farmers’ participation in agricultural insurance. A 10% increase in farmers’ neighbors’ participation in agricultural insurance increases the likelihood of farmers’ participation by 3.25%. (2) Peer effect promotes farmers’ participation by enhancing farmers’ risk perception and insurance cognition. (3) Peer effect is asymmetrical: male and larger-scale farmers have more significant effects on their peers and probably lead the participation in agricultural insurance. The results of the study have the following policy implications: (1) Increasing policy publicity and enforcing policy advocacy would magnify the positive impact of peer effect. (2) Increasing the participation rate of male and larger-scale farmers by policy interventions, which would give full play and a positive demonstration effect of specific groups. (3) Innovating insurance publicity methods to enhance farmers’ risk awareness and insurance cognition. (4) More concentration should be focused on the primary-level governance in rural China. We should advance the stock of rural social capital on all fronts to leverage the role of peer effect within rural areas.