Study On Tactics Of Agricultural Insurance In Inner Mongolia

China is a country with more agricultural economy which goes on with more natural disaster in the world. The agriculture and the development of the village and the farmers all need the support and the protection of the agricultural insurance urgently. Agricultural insurance in China had little resemblance to the limited insurance categories that are available to the Chinese farmers now. Because of farmers' low valid need of agricultural insurance and high risk in agriculture these is no a real agricultural insurance market. The low valid need of the farmers can't support a commercial agricultural insurance market and the low income of the agricultural insurance can't maintain the business of agricultural insurance companies. Following Wright and Hewitt (1994), many Chinese researchers follow the assumption of risk preference of Chinese farmers when analyzing the fact that there is the lack of interests of Chinese farmers in agricultural insurance, but few has touched the evolution of farmers risk preference with their income levels. I have conducted a four-county -survey in Bayannaoer district in Inner Mongolia to categorize the farmers' risk preference and their income level, and used Arrow-Pratt measurement to characterize the changes of risk preferences in different income levels. My initial finding is that the lack of demand for agricultural insurance in China results from the inadequate income in most rural areas, and the farmers will become more risk aversion once their income reaches a threshold level. Therefore, it is left to the government to jump-start the initial agricultural insurance program in Inner Mongolia in China. Given the positive externality of the agricultural insurance, we predict that the government sponsored agricultural insurance program is a more efficient way of using government transfer to farmers than direct production related support.