The effect of risk, ambiguity, and coordination on farmers’ adaptation to climate change: A framed field experiment
AbstractThe risk of loses of income and productive means due to adverse weather associated to climate change can significantly differ between farmers sharing a productive landscape. It is important to learn more about how farmers react to different levels of risk, under measurable and unmeasurable uncertainty. Moreover, the costs associated to investments in reduced vulnerability to climatic events are likely to exhibit economies of scope. We explore these issues using a framed field experiment that captures realistically the main characteristics of production, and the likely weather related loses of premium coffee farmers in Tarrazu, Costa Rica. Given that the region recently was severely hit by an extreme, albeit very infrequent, climatic event, we expected to observe, and found high levels of risk aversion, but we do observe farmers making trade offs under different risk levels. Although hard to disentangle at first sight given the high level of risk aversion, we find that farmer’s opt more frequently for safe options in a setting characterized by unknown risk. Finally, we find that farmers to a large extent are able to coordinate their decisions in order to achieve a lower cost of adaptation, and that communication among farmers strongly facilitates coordination.
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Bibliographic InfoPaper provided by University of Gothenburg, Department of Economics in its series Working Papers in Economics with number 382.
Length: 22 pages
Date of creation: 21 Sep 2009
Date of revision:
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Postal: Department of Economics, School of Business, Economics and Law, University of Gothenburg, Box 640, SE 405 30 GÖTEBORG, Sweden
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Risk aversion; ambiguity aversion; technology adoption; climate change; field experiment;
Other versions of this item:
- Francisco Alpizar & Fredrik Carlsson & Maria Naranjo, 2010. "The Effect of Risk, Ambiguity and Coordination on Farmers’ Adaptation to Climate Change: A Framed Field Experiment," Working Papers 2010.81, Fondazione Eni Enrico Mattei.
- C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
- Q16 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - R&D; Agricultural Technology; Biofuels; Agricultural Extension Services
- Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters
This paper has been announced in the following NEP Reports:
- NEP-AGR-2009-09-26 (Agricultural Economics)
- NEP-ALL-2009-09-26 (All new papers)
- NEP-ENV-2009-09-26 (Environmental Economics)
- NEP-EXP-2009-09-26 (Experimental Economics)
- NEP-RES-2009-09-26 (Resource Economics)
- NEP-UPT-2009-09-26 (Utility Models & Prospect Theory)
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