Impact of agricultural insurance on labor allocation

Purpose Agricultural insurance is an effective tool for agricultural risk management, which changes household production decisions by reducing the cost of risk-taking for agricultural operators. However, few studies have examined its impact on rural labor. This study examines the causal effect of agricultural insurance on the allocation of rural household labor and its potential mechanisms. Design/methodology/approach This study utilizes a two-way fixed effects model based on panel data from 2019 to 2021 from the National Fixed-Point Survey of rural China, considering the three major grain crops: wheat, maize and rice. Findings The results indicate that agricultural insurance significantly affects household labor allocation by increasing the proportion of household agricultural labor. Mechanism analysis reveals that agricultural insurance influences this outcome by increasing the probability of land transfer and expanding the area of transfer-in land by small-scale households (less than 10 mu). Heterogeneity analysis finds that the effect varies based on the share of agricultural operating income, township administrative center and agricultural cultivation size. Further analysis confirms that cash and garden crop insurance also significantly increase the proportion of the household agricultural labor. Originality/value Few studies have empirically analyzed the labor allocation effects of agricultural insurance or how these effects vary across crop types. This study fills these gaps, providing valuable guidance for assessing the policy effects of agricultural insurance in the cropping sector.