The Impact of Crop Insurance on Fertilizer Use: Evidence from Grain Producers in China

Abstract

This study aims to examine the influence of crop insurance on the utilization of chemical fertilizers using plot-level data. The dataset utilized in this analysis consists of information obtained from 1039 participants residing in four major grain-producing provinces (Heilongjiang, Zhejiang, Henan, and Sichuan) in China. To address the potential issue of endogeneity, instrumental variables were employed to establish a causal relationship within the empirical model. The findings of this study indicate that crop insurance does not exert a statistically significant impact on overall fertilizer input in China. Nonetheless, the effect varies across different categories of farmers. Specifically, large-scale farmers experience a moderate reduction in fertilizer input as a result of crop insurance, while small-scale farmers do not demonstrate a significant effect. It is essential to strike a balance between risk protection and the potential influence of moral hazard in order to enhance future crop insurance policies.