A Study On Structural Change And China’s Fiscal Subsidy Policies For Agricultural Insurances

Since the initial provision of fiscal subsidies for insurance premiums by the central government in 2007,considerable progresses have been made in China for agricultural insurances in terms of insurance premiums,protections and coverages,having basically built an institutional framework,formed stable policy expectations and preliminarily developed the agricultural insurance market.However,currently we can see characteristics of structural changes such as co-existence of formation of motives and lack of incentives with local governments,co-existence of formation of the agricultural insurance market landscape and bottleneck restrictions and differentiation of demands for agricultural insurances driven by differentiation of farmers,and also there are noticeable problems such as a low level of agricultural insurance protections,fabrication of agricultural insurance objectives,conflict between inclusiveness of agricultural insurances and differences of farmers and conflict between a single development model of agricultural insurances and regional differences.This paper focuses on government acts in connection with fiscal subsidy policies for agricultural insurances,and centering on incentives for local governments,it particularly studies on the issues of optimization of fiscal subsidy policies for agricultural insurances and optimization of government acts under the fiscal decentralization system and incentives and constraints of special transfer payment.Government acts are selected as the study perspective mainly because China’s agricultural insurances are mostly “unilaterally oriented” by governments instead of being market oriented,China’s fiscal system and governance traditions determine that regional differences should be considered with priority compared with differences of microcosmic bodies,and given that China’s agricultural insurance regime is in the construction stage under a system “fiscal decentralization and political centralization”,incentives for local governments are very important,“do it right with incentives” is particularly about do it right with incentives for local governments.Due to China’s centralization system in which complex vertical government mandates are often replaced by an abstract concept of “central decision-making and local implementation”,there are no in-depth studies into transfer payments with limited size and influences like fiscal subsidies for agricultural insurance as well as conduction mechanism,incentive effects and division of powers in relation to subsidy polices.In analyzing fiscal subsidy policies for agricultural insurances,this paper focuses on the following thoughts: Firstly,emphasize on positions of government bodies.“Finance is the base and an important pillar for state governance”,while in state governance,a decisive role of the market in resource allocation and an enhanced role of government are “coordinated in an organic way”.Studies on fiscal subsidy policies for agricultural insurances shall be carried out in a government-led macro context which involves risk distribution mechanism,resource allocation mechanism,contract mechanism,incentive compatibility constraint mechanism and institution supply mechanism.Secondly,publicness as the starting point.Publicness is the logical starting point,value base and spiritual core of public policies.The starting point of fiscal subsidy policies for agricultural insurances must stick to publicness in order to increase public benefits.Confusion of institution supply failure and technical defects shall be avoided,and segmentary and fragmentary institution designs focusing on technical factors and market factors shall be avoided.Thirdly,coordinate fairness and efficiency pursuant to the concept of “two separations and two divisions”,that is,separation of basic protections and overlaid protections of agricultural insurances,separation of government and market responsibilities,division of central government and local government responsibilities and division of long-term objectives and short-term objectives of fiscal subsidies for agricultural insurances,proposing that government responsibilities are to “underpin”,powers in relation to agricultural insurances shall be divided according to protection levels and the direct goal of policy implementation is to foster the agricultural insurance market.Fourthly,public policies,as the tools for state governance,are arrangements of system structures in nature.With limited incentive measures,institutional incentives shall be enhanced for fiscal subsidy policies for agricultural insurances,while for difficulties on the level of micro operations,guidance for market principles shall be enhanced,and follow the intrinsic logic for operating agricultural insurances and focus on efficiency instead of sticking to “presentational” quarrels between market and planning and between being compulsory and being voluntary.This paper employs methods of normative analysis,empirical analysis,institutional analysis and comparative analysis,and follows the study progression of “macro-meso-micro” and the study path of “theoretical basis-practical issuesempirical research-applied research”.Parts of the study:Part I,including Chapters I,II and III,namely Introduction,Literature Overview and Analysis of Basic Theories,which lays a study basis for the whole paper.Part II,including Chapters IV and V.In Chapter IV,an analysis framework for government acts in connection with agricultural insurances is proposed based on studies from macro perspectives.Analyze current situations,structural changes and critical issues of fiscal subsidy policies for agricultural insurances,and define the public attributes of fundamental agricultural insurances from two relatively realistic public finance perspectives,namely the nature of social protection and equalization of basic public services.An analysis framework is given for the government as “a market player” to participate in constructing the agricultural insurance system from 4 perspectives including risk distribution liability,market enhancing theory,agricultural catastrophe insurance and state governance.In Chapter V,incentive effects of fiscal subsidies for agricultural insurances are analyzed.By classifying local government incentives into fiscal system incentives(implicit)and fiscal subsidy policy incentives(explicit),incentive mechanisms for local governments to actively develop agricultural insurances are discussed from agricultural insurance supply side,macro fiscal system and policy conduction.Characteristics of fiscal system incentives for agricultural insurances and transmission effects and mechanism of action of fiscal subsidies for agricultural insurances are analyzed respectively.Finally,Directional thoughts with respect to local government incentives are proposed by way of carrying out empirical analysis over implicit and explicit incentive effects using a dynamic panel model.Part III,including Chapters VI and VII.In Chapter VI,foreign experiences in agricultural insurance regimes and their enlightenments are analyzed.Specifically,this chapter summarizes characteristics of typical agricultural insurance development models in the US,France,Japan and India,and also summarizes experiences available to learn from in seven aspects by analyzing the tracks in which those countries explored agricultural insurances,institutional arrangements based on their specific conditions and reasons for institutional implementation deviation.In Chapter VII,division of powers for agricultural insurances is proposed based on studies on the meso level.Having summarized the principles for division of powers and the current situations in China,a new viewpoint of dividing powers in relation to agricultural insurances into catastrophe protection,post disaster relief and industry development according to protections levels is proposed,and a plan identifying powers,expenditure responsibilities and operation methods is also proposed.Scientificity and feasibility for the central government to assume catastrophe protections are demonstrated from the perspectives of institutional advantages and technical advantages.In Chapter VIII,an analysis in relation to incentive constraint mechanism of division of powers of local governments is carried out.Using a mandate model,issues such as risk sharing between the central government and a local government,information utilization and incentive structures in 6 types of incentives for local governments in different development stages are analyzed.With limited incentive measures,the central government shall increase institutional incentives,and cooperation in good faith is more effective and sustainable than penalty measures.In combination of information transfer and information screening,the paper discusses strategies for the central government to increase “the degree of good faith”,including but not limited to granting local governments the right to use special funds independently by allocating funds according to categories and timely “substitution of subsidies with rewards”.Part IV,including Chapters IX and X.In Chapter IX,acts and operation systems of parties concerned in agricultural insurances are analyzed based on studies on the micro level.This chapter mainly examines the operation system of agricultural insurances on the micro level.According to the logic of “institution supply – institution operation – institution innovation”,acts of parties concerned in the institution supply mechanism in relation to agricultural insurances,“project-based” operation system for agricultural insurances and diffusion mechanism with respect to policies for agricultural insurances are analyzed respectively.Interactions between local governments and insurance companies are examined from two aspects of project-based operation system and resources reliance game strategies,and relevant policy suggestions are proposed.In Chapter X,study conclusions,policy suggestions and study prospects are summarized.