When climate risk intensifies, does insurance pay off? A community case study of China's agricultural insurance reform

Abstract

In the context of mounting global climate threats, fostering resilience in food production systems has become a critical imperative for upholding national food security. This paper exploits the staggered implementation, beginning in 2018, of China's agricultural insurance reforms covering full production costs and planting income as a quasi-natural experiment. Drawing on provincial panel data from 2013 to 2024, we first develop a multidimensional composite index to capture food production resilience. A staggered difference-in-differences specification is then adopted to systematically assess the causal effect of these reforms on such resilience and to explore the underlying transmission channels. Moreover, from a novel climate change perspective, the analysis examines the heterogeneous treatment effects across varying degrees of climate risk exposure. The empirical findings reveal that the policy-led agricultural insurance reform significantly and robustly enhances China's food production resilience. Mechanism tests indicate that advances in agricultural technology and the expansion of large-scale farming operations serve as important pathways through which the insurance policy takes effect. Further investigation shows that climate change risk positively moderates the policy impact: as climate risk intensifies, the marginal contribution of insurance to resilience becomes stronger. Heterogeneity analysis also demonstrates that the policy effect is more pronounced in western China and in localities with higher rates of disaster-induced losses. Taken together, these results offer solid empirical backing for broadening the pilot programs of full cost and planting income insurance. They also establish a theoretical basis for positioning publicly supported agricultural insurance as an effective instrument for climate change adaptation, providing valuable guidance on strengthening the climate adaptability and resilience of food production to ensure national food security.