Agricultural Insurance and Agricultural Performance: An Application of the VAR model in China

In developed as in developing countries, the study of the impact of the development of the agricultural insurance on the agricultural performance is of a big utility as far as this study allows to pull measures of economic policies which allow to promote the agricultural insurance and the strategies allowing the country to pull the profits of the development of the agricultural insurance. We show the existence or not of the causality between the agricultural performance and the development of the agricultural insurance and this by resorting to an econometric approach which defines itself as follows: by proceeding by a study of the stationarity of the series to determine their order integration. In the second stage, we test the existence of a relation of cointegration between the used variables. Afterward by specifying the parameters of the model, we make the tests of causality, decomposition of the variance and the tests of the distribution of residues. The VAR model was then used to make the various tests in China over the period 2000-2012. We found interesting results in this connection which reflect the state of the agricultural insurance and the implications of its use to allow the preservation of the agricultural performance. Besides, we showed in term of causality the implications of the application of the agricultural modalities of risk management on the agricultural performance. By applying all of the tests, we show the existence of a causality between the agricultural performance and the development of the agricultural insurance which is measured by the penetration in the agricultural insurance. And this unidirectional causality is valid for the China between 2000-2012. A causality which remains true in the short and long term, so the model can be adopted for estimating projected effects. In this result is added a causality which puts in relation the action of the State by direct helps granted to the insurants in the form of subsidies of the premiums of agricultural insurance and their effects on the agricultural performance. In these causalities, are added other relations appropriate to a country.