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Climate Uncertainty And Agricultural Soil Conservation Investment Decisions

Author

Listed:
  • PIERRE D. OUATTARA

    (Department of Economics, University FHB, Abidjan Cocody, Cote d’Ivoire)

  • EUGENE KOUASSI

    (Department of Economics, University FHB, Abidjan Cocody, Cote d’Ivoire)

  • AKLESSO Y. G. EGBENDEWE

    (#x2020;Faculty of Economics and Management Sciences (FASEG), University of Lome, P. O. Box 1515, Lome, Togo)

  • OLUYELE AKINKUGBE

    (#x2021;School of Economics and Business Sciences, University of the Witwatersrand, Johannesburg, South Africa)

Abstract

This paper conceptualizes the soil conservation decisions of farmers when confronted with climate uncertainty. Using a dynamic stochastic optimization model with uncertainty captured by climate variability, soil conservation investment is assessed within the framework of an investment adjustment cost model. The theoretical results reveal that the effects of an uncertain future climate on the optimal path of soil conservation investment depend on how sensitive production is to climate and that input and output prices have level effects on the optimal path of investment. An empirical application to data from Texas shows that depending on the sensitivity of production to climate and the severity of the risk; climate induced uncertainty may have a negative effect, a threshold (U-shaped) effect, or no effect at all on soil conservation investment.

Suggested Citation

  • Pierre D. Ouattara & Eugene Kouassi & Aklesso Y. G. Egbendewe & Oluyele Akinkugbe, 2018. "Climate Uncertainty And Agricultural Soil Conservation Investment Decisions," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 9(02), pages 1-23, May.
    • Handle: RePEc:wsi:ccexxx:v:09:y:2018:i:02:n:s2010007818500045
    DOI: 10.1142/S2010007818500045
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    References listed on IDEAS

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