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Inclusive agricultural insurance and rural consumption in China: The role of income stabilization and threshold effects

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  • Zheng, Lili
  • Zhang, Ze

Abstract

This study examines the impact of inclusive agricultural insurance (IAI) on rural household consumption in China, addressing a gap in the literature that has primarily focused on yield stabilization and farm income. Using panel data from 31 provinces during 2011–2019, we construct a provincial-level IAI development index and apply fixed-effects and panel threshold models. The results reveal that IAI significantly promotes rural household consumption, with stronger effects observed in high-consumption and grain-producing regions. A threshold effect is identified, indicating that IAI must reach a critical scale before effectively influencing consumption behavior. However, the positive impact is weaker in areas exposed to high climate risk. These findings provide evidence of the consumption-smoothing role of agricultural insurance and highlight the importance of program scale and regional context. Expanding well-designed IAI programs can help stimulate domestic demand and enhance household welfare, particularly in regions vulnerable to income volatility and climate-related shocks.

Suggested Citation

  • Zheng, Lili & Zhang, Ze, 2025. "Inclusive agricultural insurance and rural consumption in China: The role of income stabilization and threshold effects," Economic Modelling, Elsevier, vol. 153(C).
    • Handle: RePEc:eee:ecmode:v:153:y:2025:i:c:s026499932500330x
    DOI: 10.1016/j.econmod.2025.107335
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