Crop Insurance and Farm Income: Does Factor Allocation Mediate?

This study examines the direct relationship between crop insurance and farm income, considering the indirect effect of factor allocation as a mediator. The hypothesis is tested using evidence from the 77^th round survey on Land and Livestock Holdings of Households and the Situation Assessment Survey of Agricultural Households (2018-19). The results highlight that age, male headship, agricultural training, technical assistance, membership of a farmers’ organisation, kishan credit card, working under the MGNEGA, land size, consumption and experience of loss positively influence crop insurance and experience, household size, backward caste, households residing in impoverished dwellings, and farmers with higher yields have a negative effect on crop insurance. Mediation analysis suggests green technology and labour utilisation act as mediators in the relationship between crop insurance purchase and farm income. However, machinery has no significant mediation effect. The results from the propensity score matching validate our hypothesis that crop insurance impacts farm income. This study provides deeper insight into how factor allocation influences farm income through access to crop insurance, offering essential information for policymakers.