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On Adaptation To Climate Change And Risk Exposure In The Nile Basin Of Ethiopia

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  • Di Falco, Salvatore
  • Veronesi, Marcella

Abstract

This study investigates the impact of climate change adaptation on farm households’ downside risk exposure (e.g., risk of crop failure) in the Nile Basin of Ethiopia. The analysis relies on a moment-based specification of the stochastic production function. We estimate a simultaneous equations model with endogenous switching to account for the heterogeneity in the decision to adapt or not, and for unobservable characteristics of farmers and their farm. We find that (i) climate change adaptation reduces downside risk exposure, i.e., farm households that implemented climate change adaptation strategies get benefits in terms of a decrease in the risk of crop failure; (ii) farm households that did not adapt would benefit the most in terms of reduction in downside risk exposure from adaptation; and (iii) there are significant differences in downside risk exposure between farm households that did and those that did not adapt to climate change. The analysis also shows that the quasi-option value, that is the value of waiting to gather more information, plays a significant role in farm households’ decision to adapt to climate change. Farmers that are better informed may value less the option to wait to adapt, and so are more likely to adapt than other farmers.

Suggested Citation

  • Di Falco, Salvatore & Veronesi, Marcella, 2011. "On Adaptation To Climate Change And Risk Exposure In The Nile Basin Of Ethiopia," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 115549, European Association of Agricultural Economists.
  • Handle: RePEc:ags:eaae11:115549
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    Cited by:

    1. Kim, Chung-Sil & Jung, Hye-Kyung & Lee, Sang-Ho & Park, Soo-Young & Takei, Atsuo, 2012. "An Analysis on Determinants of Farmers´ Adaptation to Climate Change in Korea," Journal of Rural Development/Nongchon-Gyeongje, Korea Rural Economic Institute, vol. 35(2), July.
    2. Blasch, Julia & Farsi, Mehdi, 2012. "Retail demand for voluntary carbon offsets – a choice experiment among Swiss consumers," MPRA Paper 41259, University Library of Munich, Germany.
    3. Lokonon, Boris Odilon Kounagbè, 2016. "Crop diversification, downside risk exposure, and crop production in the Niger basin of Benin," 2016 AAAE Fifth International Conference, September 23-26, 2016, Addis Ababa, Ethiopia 246389, African Association of Agricultural Economists (AAAE).
    4. Tambo, Justice A. & Wünscher, Tobias, 2014. "Building farmers’ capacity for innovation generation: what are the determining factors?," 88th Annual Conference, April 9-11, 2014, AgroParisTech, Paris, France 170351, Agricultural Economics Society.
    5. Momanyi, Denis & Lagat, Prof. Job K. & Ayuya, Dr. Oscar I., 2016. "Analysis of the Marketing Behaviour of African Indigenous Leafy Vegetables among Smallholder Farmers in Nyamira County, Kenya," MPRA Paper 69202, University Library of Munich, Germany, revised 27 Jan 2016.
    6. Martina Bozzola & Melinda Smale & Salvatore Di Falco, 2016. "Climate, Shocks, Weather and Maize Intensification Decisions in Rural Kenya," FOODSECURE Working papers 39, LEI Wageningen UR.
    7. Moniruzzaman, Shaikh, 2015. "Crop choice as climate change adaptation: Evidence from Bangladesh," Ecological Economics, Elsevier, vol. 118(C), pages 90-98.
    8. Zuluaga, Victor & Labarta, Ricardo & Läderach, Peter, 2015. "Climate Change Adaptation: The case of the Coffee Sector in Nicaragua," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 205875, Agricultural and Applied Economics Association;Western Agricultural Economics Association.
    9. Pascale Combes Motel & Johanna Choumert & Alexandru Minea & Thomas Sterner, 2014. "Explorations in the Environment–Development Dilemma," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 57(4), pages 479-485, April.
    10. Salvatore Di Falco & Marcella Veronesi, 2014. "Managing Environmental Risk in Presence of Climate Change: The Role of Adaptation in the Nile Basin of Ethiopia," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 57(4), pages 553-577, April.
    11. Ines Kapphan & Pierluigi Calanca & Annelie Holzkaemper, 2011. "Climate Change, Weather Insurance Design and Hedging Effectiveness," IED Working paper 11-17, IED Institute for Environmental Decisions, ETH Zurich.
    12. Kassie, Menale & Teklewolde, Hailemariam & Erenstein, Olaf & Jaleta, Moti & Marenya, Paswel & Mekurai, Mulugetta, 2015. "Technology diversification: Assessing impacts on crop income and agrochemical uses in Malawi," 2015 Conference, August 9-14, 2015, Milan, Italy 211838, International Association of Agricultural Economists.
    13. Momanyi, Denis, 2016. "Analysis of the Marketing Behavior of African Indigenous Leafy Vegetables Among Smallholder Farmers in Nyamira County, Kenya," Research Theses 243443, Collaborative Masters Program in Agricultural and Applied Economics.
    14. Michele Baggio, 2012. "The Optimal Management of a Natural Resource with Switching Dynamics," IED Working paper 12-19, IED Institute for Environmental Decisions, ETH Zurich.
    15. Teklewold, Hailemariam & Kassie, Menale & Shiferaw, Bekele & Köhlin, Gunnar, 2013. "Cropping system diversification, conservation tillage and modern seed adoption in Ethiopia: Impacts on household income, agrochemical use and demand for labor," Ecological Economics, Elsevier, vol. 93(C), pages 85-93.
    16. repec:spr:ssefpa:v:9:y:2017:i:6:d:10.1007_s12571-017-0735-6 is not listed on IDEAS
    17. Thomas Epper & Helga Fehr-Duda & Renate Schubert, 2011. "Energy-Using Durables: The Role of Time Discounting in Investment Decisions," IED Working paper 11-16, IED Institute for Environmental Decisions, ETH Zurich.
    18. repec:bla:agecon:v:48:y:2017:i:6:p:693-706 is not listed on IDEAS

    More about this item

    Keywords

    adaptation; climate change; endogenous switching; Ethiopia; risk exposure; stochastic production function; skewness; Resource /Energy Economics and Policy; Risk and Uncertainty; D80; Q18; Q54;

    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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