| Agriculture is the pillar industry of China. The weakness of agriculture and the particularity of agricultural risk determine that agricultural insurance plays an important role in agricultural risk dispersion and the increase of farmer income. A good agricultural insurance system is the basic guarantee for the development of agriculture and the increase of farmer income. While, the increase of farmer income can also increase the demand of agricultural insurance. So, it is necessary to study the effect of famer income upon policy-oriented agricultural insurance of China since 2004 when policy-oriented agricultural insurance pilots were carried out.This paper analyzes how policy-oriented agricultural insurance effect famer income, and describes how they interact in China. Relevant data of 31 provinces from 2004 to 2012 are used to build a panel VAR model, and cointergration test and Grainger causality test show that there is a cointergration relationship between policy-oriented agricultural insurance and farmer income, and they are Grainger causal relationship of each other. As a result, policy-oriented agricultural insurance have a positive effect on famer income, but the effect is small and lagging. The famer income has a positive effect on demand of policy-oriented agricultural insurance, too. In the end, this paper gives three views of suggestions to improve the policy-oriented agricultural insurance system of China, including financial support, system improvement, and personnel training. |
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