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Social Capital, Income Diversification and Climate Change Adaptation: Panel Data Evidence from Rural Ethiopia

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  • David Wuepper
  • Habtamu Yesigat Ayenew
  • Johannes Sauer

Abstract

The choice between specialisation and diversification of income is driven by multiple, interacting factors, such as economies of scale and scope, risk considerations, context, and household characteristics. Using panel data from Ethiopia, we investigate the role of social capital and the covariate risk of climate change and their interaction. We find that households with greater social capital tend to be more specialised, implying that diversification and informal insurance are substitutes in the mitigation of risk. We also find that this effect is significantly weaker in regions more prone to climate change, which is consistent with the average farmer being aware that informal insurance is not an effective protection against risks that affect the entire social network. We use instrumental variable random effects estimation to account for the plausible endogeneity of social capital and we also establish that our results do not depend on the poorest and most constrained individuals in our sample.

Suggested Citation

  • David Wuepper & Habtamu Yesigat Ayenew & Johannes Sauer, 2018. "Social Capital, Income Diversification and Climate Change Adaptation: Panel Data Evidence from Rural Ethiopia," Journal of Agricultural Economics, Wiley Blackwell, vol. 69(2), pages 458-475, June.
    • Handle: RePEc:bla:jageco:v:69:y:2018:i:2:p:458-475
    DOI: 10.1111/1477-9552.12237
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    Cited by:

    1. Wuepper, David & Wimmer, Stefan & Sauer, Johannes, 2020. "Is small family farming more environmentally sustainable? Evidence from a spatial regression discontinuity design in Germany," Land Use Policy, Elsevier, vol. 90(C).
    2. Arne Henningsen & Guy Low & David Wuepper & Tobias Dalhaus & Hugo Storm & Dagim Belay & Stefan Hirsch, 2024. "Estimating Causal Effects with Observational Data: Guidelines for Agricultural and Applied Economists," IFRO Working Paper 2024/03, University of Copenhagen, Department of Food and Resource Economics.
    3. Eline D'Haene & Juan Tur Cardona & Stijn Speelman & Koen Schoors & Marijke D'Haese, 2021. "Unraveling preferences for religious ties in food transactions: A consumer perspective," Agricultural Economics, International Association of Agricultural Economists, vol. 52(4), pages 701-716, July.
    4. Gao, Yang & Liu, Bei & Yu, Lili & Yang, Haoran & Yin, Shijiu, 2019. "Social capital, land tenure and the adoption of green control techniques by family farms: Evidence from Shandong and Henan Provinces of China," Land Use Policy, Elsevier, vol. 89(C).
    5. Xin Deng & Miao Zeng & Dingde Xu & Yanbin Qi, 2020. "Does Social Capital Help to Reduce Farmland Abandonment? Evidence from Big Survey Data in Rural China," Land, MDPI, vol. 9(10), pages 1-17, September.
    6. Aihounton, Ghislain & Henningsen, Arne & Trifkovic, Neda, 2021. "Pesticide Handling and Human Health: Conventional and Organic Cotton Farming in Benin," 2021 Conference, August 17-31, 2021, Virtual 315407, International Association of Agricultural Economists.
    7. Kahsay, Goytom Abraha & Garcia, Nerea Turreira & Bosselmann, Aske Skovmand, 2023. "Mobile Internet Use and Climate Adaptation: Empirical Evidence from Vietnamese Coffee Farmers," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 48(3), September.
    8. Castillo, Gracia Maria Lanza & Engler, Alejandra & Wollni, Meike, 2021. "Planned behavior and social capital: Understanding farmers’ behavior toward pressurized irrigation technologies," Agricultural Water Management, Elsevier, vol. 243(C).
    9. Mulwa, Chalmers K. & Visser, Martine, 2020. "Farm diversification as an adaptation strategy to climatic shocks and implications for food security in northern Namibia," World Development, Elsevier, vol. 129(C).
    10. Chloe H. Lucas & Kate I. Booth & Carolina Garcia, 2021. "Insuring homes against extreme weather events: a systematic review of the research," Climatic Change, Springer, vol. 165(3), pages 1-21, April.
    11. Ghislain B. D. Aihounton & Arne Henningsen, 2023. "Does Organic Farming Jeopardize Food and Nutrition Security?," IFRO Working Paper 2023/02, University of Copenhagen, Department of Food and Resource Economics.
    12. Aïhounton, Ghislain B.D. & Henningsen, Arne, 2024. "Does organic farming jeopardize food security of farm households in Benin?," Food Policy, Elsevier, vol. 124(C).
    13. Ghislain Aihounton & Luc Christiaensen, 2023. "Does Agricultural Intensification Pay?," World Bank Publications - Reports 39701, The World Bank Group.
    14. Wenjian He & Yiyang Liu & Huaping Sun & Farhad Taghizadeh-Hesary, 2020. "How Does Climate Change Affect Rice Yield in China?," Agriculture, MDPI, vol. 10(10), pages 1-16, September.
    15. Edouard Pignède, 2025. "Who carries the burden of climate change? Heterogeneous impact of droughts in sub‐Saharan Africa," American Journal of Agricultural Economics, John Wiley & Sons, vol. 107(3), pages 925-957, May.
    16. Gamel Abdul-Nasser Salifu, 2019. "The Political Economy Dynamics of Rural Household Income Diversification: A Review of the International Literature," Research in World Economy, Research in World Economy, Sciedu Press, vol. 10(3), pages 273-290, December.
    17. Aihounton, Ghislain & Christiaensen, Luc, 2024. "Does agricultural intensification pay in the context of structural transformation?," Food Policy, Elsevier, vol. 122(C).
    18. Imron Zahri & Elisa Wildayana & Agus Thony Ak & Dessy Adriani & M. Umar Harun, 2019. "Impact of conversion from rice farms to oil palm plantations on socio-economic aspects of ex-migrants in Indonesia," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 65(12), pages 579-586.
    19. Tuan Nguyen‐Anh & Shawn Leu & Anh Nguyen‐Thi‐Phuong & Thanh Ngo‐Dang & Nguyen To‐The, 2023. "Adapting to the new normal: A sustainable livelihood framework for the informal sectors during COVID‐19," Review of Development Economics, Wiley Blackwell, vol. 27(2), pages 1092-1112, May.
    20. Asfaw, Solomon & Pallante, Giacomo & Palma, Alessandro, 2020. "Distributional impacts of soil erosion on agricultural productivity and welfare in Malawi," Ecological Economics, Elsevier, vol. 177(C).
    21. Antonelli, Chiara & Coromaldi, Manuela & Pallante, Giacomo, 2022. "Crop and income diversification for rural adaptation: Insights from Ugandan panel data," Ecological Economics, Elsevier, vol. 195(C).
    22. Isabel Saz-Gil & Ignacio Bretos & Millán Díaz-Foncea, 2021. "Cooperatives and Social Capital: A Narrative Literature Review and Directions for Future Research," Sustainability, MDPI, vol. 13(2), pages 1-18, January.

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