The Impact of a Full-Cost Insurance Policy on Fertilizer Reduction and Efficiency: The Case of China

Abstract

Excessive fertilizer input and inefficient utilization in agricultural production have caused significant negative environmental impacts. Based on provincial panel data in China from 2005 to 2021, this study adopts the full-cost insurance pilot launched in 2018 and uses the DID method to empirically analyze its impact on fertilizer application intensity and utilization efficiency. The study reveals the following findings: (1) Implementing full-cost insurance can reduce fertilizer application intensity by 21.761% and increase utilization efficiency by 1.915%. (2) Full-cost insurance reduces fertilizer application intensity and improves fertilizer utilization efficiency by expanding the land scale and reducing the agricultural labor force. (3) Full-cost insurance significantly improves fertilizer utilization efficiency in high-risk and low-risk areas. Nevertheless, while the policy significantly reduces fertilizer application intensity in high-risk areas, its effect on low-risk areas is not apparent. (4) Full-cost insurance has an environmental protection effect. It can significantly reduce 11.593% of nitrogen pollution emissions, 2.577% of phosphorus pollution emissions, and 35.400% of equivalent pollution emissions. The implementation of full-cost insurance plays an important role in reducing fertilizer use and improving utilization efficiency. So, we should continue to intensify the promotion of full-cost insurance policy to fully leverage the advantages of agricultural insurance and promote sustainable agricultural development.