Heckman Two-stage Model Based on Conditional Value Methods: Application to Willingness to Pay for Agricultural Insurance

Abstract

Academia and industry in China have emphasized the necessity of improving the coverage level of agricultural insurance, which means an increase in premiums. Are farmers willing to pay high premiums at high coverage levels? What are the preferences of farmers with different characteristics for agricultural insurance with different high coverage levels? Considering the problems mentioned above, based on field survey data, by adopting Conditional Value Methods and the Heckman Two-stage Model, farmers’ willingness to pay for high coverage agricultural insurance and its impact factors are elaborated. The results show that age, years of farming, risk aversion, planting area, and household net income have a significant impact on farmers’ willingness to pay; farmers with low specialization and low diversified planting tend to choose full-cost insurance, while farmers with higher education level prefer output value insurance. In this case, suggestions on positioning the target farmers for high-coverage level agricultural insurance and promoting the implementation of high-coverage level agricultural insurance pilot work are put forward.