A Research Paradigm of Weather Index Insurance for Grassland Animal Husbandry: A Pathway to Increased Income for Herders in China’s Inner Mongolia

Abstract

This paper aims to theoretically and empirically test whether the Weather Index Insurance for Mutton Sheep (WIMS) which protects the herders from increased feeding costs resulting from drought and snow disasters promotes the income of herders in China’s Inner Mongolia or not. We have applied the OLS, PSM, and quantile regression models using field survey data from 261 herders in Xilin Gol, Inner Mongolia Autonomous Region for our objective. The findings demonstrate that the WIMS significantly increases the overall and high-income herders’ income, but has no significant effect on herders’ income at other income levels.. According to the results, we recommend that as the subsidized agricultural insurance product, the government should expand the pilot region of WIMS to furtherly test its income effect and consider reducing or exempting insurance premiums for low-income herders to reduce their financial pressure.