Subjective and objective risk perceptions and the willingness to pay for agricultural insurance: evidence from an in-the-field choice experiment in rural China

Hong Fu; Yuehua Zhang; Yinuo An; Li Zhou; Yanling Peng; Rong Kong; Calum G Turvey

doi:10.1057/s10713-021-00071-6

Subjective and objective risk perceptions and the willingness to pay for agricultural insurance: evidence from an in-the-field choice experiment in rural China

Geneva Risk Insur Rev. 2022;47(1):98-121. doi: 10.1057/s10713-021-00071-6. Epub 2021 Oct 19.

Authors

Hong Fu¹, Yuehua Zhang², Yinuo An³, Li Zhou⁴, Yanling Peng⁵, Rong Kong⁶, Calum G Turvey³

Affiliations

¹ Shandong University of Finance and Economics, Jinan, Shandong China.
² Zhejiang University, Zhejiang, Zhejiang China.
³ Cornell University, Ithaca, NY USA.
⁴ Nanjing Agricultural University, Nanjing, Jiangsu China.
⁵ Sichuan Agricultural University, Chengdu, Sichuan China.
⁶ Northwest Agriculture and Forestry University, Yangling, Shaanxi China.

Abstract

We conducted in-the-field choice experiments in China to investigate farmers' willingness to pay for crop insurance and to determine how objective and subjective beliefs affect Willingness to Pay (WTP). We deploy three variants of the choice experiment using a priming mechanism on objective and subjective beliefs plus a control. We find that the cuing frame matters in that there are differences in WTP within five attributes and across variants. In terms of practical policy, our results suggest that farmers' frame of reference toward objective and subjective risks can affect insurance demand.

Keywords: Agricultural insurance; China; Choice experiments; Risk perception; Subjective and objective risk.