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Adaptation to Climate Change: Farmers' Risk Preferences and the Role of Irrigation

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  • Bozzola, Martina

Abstract

We adopt a moment based approach to investigate how individual producers' optimize input usage, in particular irrigation water, taking into account their risk preferences. We rely on a panel data of 122,800 Italian farms, spread over 1981 to 2003. We capture both variation over farms and over time. We show that risk aversion has increased over time, while down-side risk aversion has been more stable and that farmers specializing in different crops exhibit different risk aversion and use irrigation water with diverse efficiency. Higher downside risk aversion is a key determinant in the decision to adopt irrigation technology.

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  • Bozzola, Martina, 2014. "Adaptation to Climate Change: Farmers' Risk Preferences and the Role of Irrigation," 2014 International Congress, August 26-29, 2014, Ljubljana, Slovenia 182771, European Association of Agricultural Economists.
    • Handle: RePEc:ags:eaae14:182771
    DOI: 10.22004/ag.econ.182771
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    1. Ben Groom & Phoebe Koundouri & Celine Nauges & Alban Thomas, 2008. "The story of the moment: risk averse cypriot farmers respond to drought management," Applied Economics, Taylor & Francis Journals, vol. 40(3), pages 315-326.
    2. Sébastien Foudi & Katrin Erdlenbruch, 2012. "The role of irrigation in farmers’ risk management strategies in France," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 39(3), pages 439-457, July.
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    5. Phoebe Koundouri & Céline Nauges & Vangelis Tzouvelekas, 2006. "Technology Adoption under Production Uncertainty: Theory and Application to Irrigation Technology," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(3), pages 657-670.
    6. Salvatore Di Falco & Jean-Paul Chavas, 2006. "Crop genetic diversity, farm productivity and the management of environmental risk in rainfed agriculture," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 33(3), pages 289-314, September.
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    8. Antle, John M, 1983. "Testing the Stochastic Structure of Production: A Flexible Moment-based Approach," Journal of Business & Economic Statistics, American Statistical Association, vol. 1(3), pages 192-201, July.
    9. Kim, Kwansoo & Chavas, Jean-Paul, 2003. "Technological change and risk management: an application to the economics of corn production," Agricultural Economics, Blackwell, vol. 29(2), pages 125-142, October.
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    Cited by:

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    2. Prifti, Ervin & Daidone, Silvio & Pace, Noemi & Davis, Benjamin, 2019. "Unconditional cash transfers, risk attitudes and modern inputs demand," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 53, pages 100-118.
    3. Chepkoech, Winifred & Stöber, Silke & Kurgat, Barnabas K. & Bett, Hillary K. & Mungai, Nancy W. & Lotze-Campen, Hermann, 2023. "What drives diversity in climate change adaptation strategies for African indigenous vegetable production in Kenya?," Economic Analysis and Policy, Elsevier, vol. 77(C), pages 716-728.
    4. Abbas, Qasir & Han, Jiqin & Bakhsh, Khuda & Ullah, Raza & Kousar, Rakhshanda & Adeel, Adnan & Akhtar, Asma, 2022. "Adaptation to climate change risks among dairy farmers in Punjab, Pakistan," Land Use Policy, Elsevier, vol. 119(C).

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    Keywords

    Environmental Economics and Policy; Risk and Uncertainty;

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