October 2016 Vol. 4 No.10

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Dehghani A
Shiri S

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Original Research Article

Examining the Effect of Agricultural Product Insurance on Value Added in the Agricultural Sector Using Panel Data Technique in Various Provinces of Iran from 2001 to 2011

Ali Dehghani¹ and Sharareh Shiri^2*

¹Department of Administration, Islamic Azad University, south Tehran Branch
²Master of Economics, Islamic Azad University, South Tehran Branch

*Corresponding Author’s Email: shararehshiri@yahoo.com

Accepted July 02, 2016

Abstract

Nowadays, insurance is considerably important due to feasibility of multiple economic activities in addition to positive effects on magnitude and prosperity of economy, employment, managed assets, etc. Some scholars even believe that development of various economic sectors can be detected through proper performance of insurance department in those sectors. Insurance has different effects on economy among which improved economic stability and reduced concerns can be cited, which stimulate economic growth. This effect is mostly highlighted in the agricultural sector due to great influence of random factors. The present paper aimed to examine the effect of agricultural product insurance on value added in the agricultural sector using panel data technique in various provinces from 2001 to 2011. Library method and econometric (panel data technique) were used to study theoretical foundations due to nature of the study. In addition, panel data technique and E-views software were used to introduce and fit the econometric model according to topic of the study and research variables. Excel software was used to display the statistical data. The results of data analysis showed that the econometric model was estimated using random effect. The results showed that growth rate of the amount of compensation paid to agricultural sector had a significant and positive effect (0.025) on growth rate of value added in the agricultural sector. This coefficient shows that the amount of compensation paid to farmers has significantly and positively increased the growth rate of value-added agricultural products. There was also a significant and positive relationship between growth rate of gross capital formation sector and growth rate of value added in the agricultural sector (0.23). Moreover, there was a positive and significant relationship between growth rate of labor force employed in the agriculture sector and growth rate of value added in the agricultural sector(1.04). It may be argued that the impact of traditional factors of production like labor and capital (especially labor) on growth rate of value added in the agricultural sector is greater than other factors. The situation is not unexpected since Iranian agricultural sector mostly relies on labor and capital instead of technology, advanced equipment and modern production methods. In other words, Iranian agricultural sector relies on labor rather than capital, which is due to legacy of agricultural sector in Iran.

Keywords: Agricultural insurance, Growth of agricultural sector, Value added