Can crop insurance help optimize farmers’ decisions on pesticides use? Evidence from family farms in East China

Abstract

Pesticides are important agricultural inputs, which can effectively reduce crop growth risk, but irrational use of pesticides also brings major challenges to the green development of agriculture. This paper constructs a theoretical framework of the effect of crop insurance on pesticides usage. Then using family farm survey data in East China, we measure the marginal value cost ratio (MVCR) of pesticides use through the improved damage abatement production function (DAPF), and empirically analyze the impact of crop insurance on MVCR of pesticides use by employing the endogenous treatment effect model (ETEM). The results show that 42.6% of family farms in the sample area purchased crop insurance, and almost all family farms overused pesticides, but the degree was relatively lower among the family farms with crop insurance. Crop insurance has a significantly positive effect on the MVCR of pesticides use, which indicates that it can optimize farmers’ pesticides use behavior. This conclusion is also confirmed by several robustness checks. Thus, the promotion of agricultural insurance can play the role of promoting the green development of agriculture to a certain extent.