EfD Discussion Paper

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Shocks, Remittances and Household Consumption A Dynamic System GMM Analysis
(2028-02) Alem, Yonas; University of Gothenburg
We use a dynamic system GMM regression on ve rounds of panel data to estimate the impact of international remittances on consumption of urban Ethiopian households, who spend more than 70% of their consumption budget on food. Results suggest that international re- mittances play a signi cant role in augmenting household consumption. A 1% increase in remittances from abroad leads to a 0.10% increase in household consumption. Taking advan- tage of the detailed nature of the panel data, we also show that households that experienced idiosyncratic shocks are likely to send a member abroad and receive international remittances. The paper sheds light on the magnitude of the impact of international remittances and the char- acteristics of the socio-economic groups who take advantage of a rapidly changing economic environment, such as access to international migration.
Assessing the Performance of Alternative Water and Sanitation Tariffs: The Case of Nairobi, Kenya
(2017-12) Fuente, David; Kabubo-Mariara, Jane; Kimuyu, Peter; Mwaura, Mbutu; Whittington, Dale; Corresponding author: David Fuente, The School of Earth, Ocean and Environment, University of South Carolina, 701 Sumter Street, EWS 617, Columbia SC 29208, USA, email: fuente@seoe.sc.edu. Jane Kabubo-Mariara, Partnership for Economic Policy (PEP), Kenya, School of Economics, University of Nairobi, Kenya. Peter Kimuyu, Commission for Revenue Allocation, Kenya. Mbutu Mwaura, Nairobi City Water and Sewer Company, Kenya. Dale Whittington, Department of City and Regional Planning, UNC-CH, USA, Department of Environmental Sciences and Engineering - Gillings School of Global Public Health, UNC-CH, USA, Manchester Business School, University of Manchester, UK.
Policy makers and utility managers can use a variety of tariff structures to calculate customers’ bills for water and sanitation services, ranging from a simple flat monthly fee to complicated multipart tariffs with seasonal pricing based on metered water use. This paper examines the performance of alternative tariff structures for water and wastewater services in Nairobi, Kenya. In particular, we evaluate the performance of alternative tariffs relative to several criteria: the overall quantity of water sold (i.e., conservation), the magnitude of the total subsidy delivered through the tariff, subsidy incidence, change in customer welfare, and change in social welfare. To accomplish this, we develop a dynamic tariff simulation model and use a complete set of billing records from Nairobi City Water and Sewer Company to model the performance of alternative tariff structures. Contrary to conventional wisdom, we find that tariff alternatives with a uniform volumetric price perform as well as or better than increasing block tariff alternatives across nearly all policy-relevant metrics of tariff performance. These findings hold at the three levels of cost recovery that we consider and are robust to a wide range of assumptions about consumer behavior. This finding stands in stark contrast to the widespread use of increasing block tariffs (IBTs) in low and middle-income countries and to current perceptions of best practice in tariff design. Additionally, we find that neither the size of the lifeline block nor the number of blocks affects the relative performance of the IBT tariff alternatives in a policy-relevant manner. Finally, our simulations underscore the benefits of getting utilities on a path to improved cost recovery. This will be essential to ensuring governments have the resources to invest in climate resilient infrastructure and to meet the Sustainable Development Goals’ aspiration of ensuring universal access to safe water and sanitation services.
The Impact of Micro Hydroelectricity on Household Welfare Indicators
(2017-12) Karumba, Mary Muthoni; Muchapondwa, Edwin; Mary Muthoni Karumba, University of Cape Town, muthonikarumba48@gmail.com. Edwin Muchapondwa, University of Cape Town
The use of small-scale off-grid renewable energy for rural electrification is now seen as one sustainable energy solution. The expectations from such small-scale investment include meeting basic household energy needs and thereby improving some aspects of household welfare. However, these stated benefits remain largely hypothetical because there are data and methodological challenges in existing literature attempting to isolate such impacts. This paper uses field data from micro hydro schemes in Kenya and a propensity score matching technique to demonstrate such an impact. We find that, on average, households connected to micro hydroelectricity consume 1.5 litres less kerosene per month compared to households without any such electricity connection. Also, non-connected households spend 0.92 USD more for re-charging their cell phone batteries per month in comparison to those who were using micro hydroelectricity service. Finally, school children from households that are connected to micro hydroelectricity were found to devote 43 minutes less to evening studies compared to those without electricity. The findings provide interesting insights about some of the claims made for or against the use of off-grid renewable energy for rural electrification.
Evaluating Rural Electrification: Illustrating Research Gaps with the Case of Bhutan
(2017-12) Litzow, Erin; Pattanayak, Subhrendu K.; Thinley, Tshering; Erin Litzow is an Associate in Research at Duke University. Subhrendu Pattanayak is a Professor at Duke University. Tshering Thinley is a Lecturer of Physics at Sherubtse College and the Dean at Yongphula Centenary College, Royal University of Bhutan. Address correspondence to erin.litzow@duke.edu.
Electrification, especially rural electrification (RE), is a core component of the Sustainable Development Goals and a major focal point of the global development community. Despite this focus, more than one billion people worldwide do not have access to electricity, and electrification growth rates are not keeping pace with population growth. In this paper, we posit that lack of progress is partly driven by a misalignment between academic research and energy planners’ and policy makers’ needs. A majority of the studies measuring the impacts of electrification focus on precise estimation of a few outcomes, specifically health, education and productivity impacts. Other important impacts, e.g. environmental, have remained largely unstudied. As a consequence, quantifying the full set of costs and benefits of expanding electricity access is difficult and rarely done. When cost benefit analyses are done, they are often incomplete, and conclusions are highly susceptible to unavailable or uncertain parameter estimates. We illustrate these arguments in the case of Bhutan, where RE rates have expanded rapidly in the past few decades. We show that RE had positive impacts related to fuelwood consumption, education, and employment, but we do not find an effect on health. We then use these impact estimates to conduct cost-benefit analyses. Because there are more parameters in these calculations than we have data for from Bhutan, we transfer reasonable estimates from related contexts. However, to acknowledge the uncertainty induced by this process, we conduct Monte Carlo analyses to see if the NPV calculations are robust to alternative parameter values. Based on this exercise, we highlight research gaps that are preventing 1) thorough accounting of the net present value of RE in diverse settings and 2) financial investment in the sector.
Chinese Local Residents’ Attitudes toward Shale Gas Exploitation: The Role of Energy Poverty, Environmental Awareness, and Benefit and Risk Perceptions
(2017-12) Yu, Chin-Hsien; Tan, Huimin; Qin, Ping; Chen, Xiaolan; Chin-Hsien Yu, corresponding author: Tel.: +86 18628328111; Email address: chenxiaolan@scu.edu.cn. Institute of Development, Southwestern University of Finance and Economics, Chengdu, Sichuan 611130, PR China. Huimin Tan, School of Business Administration, Southwestern University of Finance and Economics, Chengdu, Sichuan 611130, PR China. Ping Qin, Department of Energy Economics, School of Economics, Renmin University of China, Beijing 100872, China. Xiaolan Chen, School of Economics, Sichuan University, Chengdu, Sichuan 610065, PR C
This study investigates Chinese local residents’ attitudes toward shale gas exploitation through an interview of 730 local residents in two counties of Sichuan Province (Weiyuan County and Gong County) and explores the determinants of their support or opposition. It is the first study in China to explore local residents’ attitudes, and we comprehensively identify underlying factors accounting for such attitudes, including energy poverty, environmental awareness, and risk and benefit perceptions. The results show that the respondents are generally supportive of toward shale gas development, no matter whether the shale well is built in their hometown or at a distance. About 70% of the respondents express support or strong support for shale gas exploitation, and less than 20% of them oppose or strongly oppose such development. The results also show that the respondents are more likely to oppose shale gas exploitation if they perceive lower benefits or higher risks associated with shale development, if they are more environmentally aware, or if they suffer from a higher degree of energy poverty.
One-Off Subsidies and Long-Run Adoption: Experimental Evidence on Improved Cooking Stoves in Senegal
(2017-11) Bensch, Gunther; Peters, Jörg; Bensch, corresponding author: RWI, Hohenzollernstraße 1-3, 45128 Essen, Germany (e-mail: bensch@rwi-essen.de). Peters: RWI and University of Passau (e-mail: peters@rwi-essen.de).
Free technology distribution can be an effective development policy instrument if adoption is socially inefficient and hampered by affordability constraints. Yet, policy makers often oppose free distribution, arguing that reference dependence spoils the willingness to pay and thus market potentials in the long run. For improved cookstoves, this paper studies the willingness to pay six years after a randomized one-time free distribution. Using a real-purchase offer procedure, we find that households who received a free stove in the past do not reveal a lower willingness to pay to repurchase the stove. Furthermore, we provide exploratory evidence that learning and reference-dependence effects do not spill over from the treatment to the control group. The policy implication is that one-time free distribution does not disturb future market establishment and might even facilitate it.
:Social Norms Information Treatments in the Municipal Water Supply Sector Some New Insights on Benefits and Costs
(2017-11) Whittington, Dale; Nauges, Celine; Dale Whittington, corresponding author, University of North Carolina at Chapel Hill, profdalewhittington@gmail.com. Celine Nauges, Toulouse School of Economics.
Social norms comparisons are tools that are being used more and more often by energy and water utilities all over the world in order to induce households to conserve resources. Such conservation programs are appealing to utilities because they are an easy-to-implement alternative to raising prices and commonly result in short-term reductions in energy and water use of about 2-5%. However, the welfare effects of social norms programs are rarely discussed and assessed, especially in the context of municipal water supply. The purpose of this article is to propose a framework for identifying the costs and benefits of social norms comparisons and to provide plausible estimates for these components in the municipal water supply sector, using current knowledge for both developing and industrialized countries. Our calculations show that the outcome of a benefit-cost analysis of a social norms information treatment is highly uncertain and location-specific. We also present a simple benefit-cost analysis of a price increase that would lead to an equivalent initial reduction in household water use. The latter is found to be more likely to generate net benefits to the society as a whole in low- and middle-income countries, but we show that, in this case, households would have to bear most of the costs.
Demand for Off-Grid Solar Electricity: Experimental Evidence from Rwanda
(2017-11) Grimm, Michael; Lenz, Luciane; Peters, Jörg; Sievert, Maximiliane; Michael Grimm, University of Passau, Erasmus University Rotterdam and IZA. Luciane Lenz and Maximiliane Sievert, RWI – Leibniz Institute for Economic Research. Corresponding author: Jörg Peters, RWI – Leibniz Institute for Economic Research, University of Passau, and University of Passau. Mailing address: RWI, Hohenzollenstraße 1-3, 45128 Essen, Germany. E-mail: peters@rwi-essen.de. Phone: ++49-201-8149-237
The cost of providing electricity to the unconnected 1.1 billion people in developing countries is significant. High hopes are pinned on market-based dissemination of off-grid technologies to complement the expensive extension of public grid infrastructure. In this paper, we elicit the revealed willingness-to-pay for different off-grid solar technologies in a field experiment in rural Rwanda. Our findings show that households are willing to dedicate substantial parts of their budget to electricity, but not enough to reach cost-covering prices. Randomly assigned payment periods do not alter this finding. We interpret the results from two perspectives. First, we examine whether the United Nations’ universal energy access goal can be reached via unsubsidized markets. Second, in a stylized welfare cost-benefit analysis, we compare a subsidization policy for off-grid solar electrification to a grid extension policy. Our findings suggest that, for most of rural Africa, off-grid solar is the preferable technology to reach mass electrification, and that grid infrastructure should concentrate on selected prosperous regions.
Risk Preferences and the Poverty Trap: A Look at Farm Technology Uptake amongst Smallholder Farmers in the Matzikama Municipality
(2017-10) Jumare, Hafsah; Visser, Martine; Brick, Kerri; Hafsah Jumare, Martine Visser (corresponding author: Martine.Visser@uct.ac.za) and Kerri Brick. University of Cape Town, School of Economics, Environmental-Economics Policy Research Unit, Private Bag 7701, Rondebusch, Cape Town, South Africa.
This study looks at the determinants of farm technology uptake, with attention to farmers’ risk preference and income. We use a field experiment to elicit measures of risk aversion, loss aversion, and non-linear weights of probability. We then relate these measures to the uptake of drought-resistant and improved seeds. In light of the poverty trap theory, we also consider the role that income plays in risk preference. Our findings suggest that farm risk management policies need to take into account the role of risk and loss preferences in uptake decisions. We find that farmers do not effectively weight probabilities and that the weighting of probabilities in turn affects the uptake of adaptive mechanisms. Improved access to extension services can help farmers understand weather and climate risk, probabilities of loss, and technologies and other adaptive strategies. We also find that low incomes discourage the uptake of resilient crop types, both in the form of naturally drought-resistant crops and technologically modified improved seeds. This signals the need for proactive measures to guarantee access to a minimum package of assets to poor farmers.
Households’ Risk Perceptions in Response to Shale Gas Exploitation: Evidence from China
(2017-10) Yu, Chin-Hsien; Huang, Shih-Kai; Qin, Ping; Chen, Xiaolan; Chin-Hsien Yu, Institute of Development Studies, Southwestern University of Finance and Economics, Chengdu, Sichuan 611130, PR China. Shih-Kai Huang, Department of Emergency Management, Jacksonville State University, Alabama, USA. Ping Qin, Department of Energy Economics, School of Economics, Renmin University of China, Beijing 100872, China. Xiaolan Chen (corresponding author: chenxiaolan@scu.edu.cn), School of Economics, Sichuan University, Chengdu, Sichuan 610065, PR China.
In 2014, China became the world’s third country to realize shale gas commercial development, following the United States and Canada. So far, there has been a lack of comprehensive discussion on risk perception related to shale gas in China. This paper aims to understand Chinese residents’ risk perceptions toward shale gas exploitation. A survey was conducted with 730 interviewed participants in two counties of Sichuan province (Weiyuan County and Gong County). This study shows that, in China, an elderly female tends to perceive lower risks, and a higher education level is commonly associated with lower risk perception. Besides the socio-demographic characteristics, two major findings are also explored in this study. First, household’s perceived benefits from shale gas exploitation do not statistically significantly affect their risk concerns. Second, the respondents’ environmental consciousness, including their anticipation of environmental impacts and their perceptions about environmental degradation, plays a crucial role in their perception of the risks of shale gas exploitation. This implies that local residents’ judgments on the severity of environmental impacts significantly contribute to their risk perceptions. These findings therefore contribute to local authorities’ policy making in protecting local residents from the risks of shale gas exploitation and in better communicating about risk with the residents.
Self-Enforcing International Environmental Agreements: The Role of Climate Tipping
(2017-10) Liu, Xin; Zhu, Lei; Zhang, Xiao-Bing; Hennlock, Magnus; ∗Xin Liu, Chinese Academy of Sciences. Lei Zhu, Beihang University. Xiao-Bing Zhang (corresponding author: xbzhmail@gmail.com), Renmin University of China, Beijing, PRC. Magnus Hennlock, IVL Swedish Environmental Research Institute.
Determinants of Successful Collective Management of Forest Resources: Evidence from Kenyan Community Forest Associations
(2017-10) Okumu, Boscow; Muchapondwa, Edwin; School of Economics, University of Cape Town; Private Bag Rondebosch 7701, Cape town. Corresponding author: kodhis2000@ gmail.com or okmbos002@myuct.ac.za. Professor, School of Economics, University of Cape Town. edwin.muchapondwa@uct.ac.za
Participation of local communities in management and utilization of forest resources through collective action has become widely accepted as a possible solution to failure of centralized, top-down approaches to forest conservation. Developing countries have thus resorted to devolution of forest management through initiatives such as Participatory Forest Management (PFM) and Joint Forest Management (JFM). In Kenya, under such initiatives, communities have been able to self-organize into community forest associations (CFAs). However, despite these efforts and an increased number of CFAs, the results in terms of ecological outcomes have been mixed, with some CFAs failing and others thriving. Little is known about the factors influencing success of these initiatives. Using household-level data from 518 households and community-level data from 22 CFAs from the Mau forest conservancy, the study employed logistic regression, OLS and heteroscedasticity-based instrumental variable techniques to analyze factors influencing household participation levels in CFA activities and to further identify the determinants of successful collective management of forest resources, as well as the link between participation level and the success of collective action. The results show that the success of collective action is associated with the level of household participation in CFA activities, distance to the forest resource, institutional quality, group size, and salience of the resource, among other factors. We also found that collective action is more successful when CFAs are formed through users’ self-motivation with frequent interaction with government institutions and when the forest cover is low. Factors influencing the level of household participation are also identified. The study findings point to the need for: a robust diagnostic approach in devolution of forest management to local communities, considering diverse socio-economic and ecological settings; government intervention in reviving and re-institutionalizing existing and infant CFAs in an effort to promote PFM within the Mau forest and other parts of the country; and intense effort towards design of a mix of incentive schemes to encourage active and equal household participation in CFA activities.
Determinants of Adoption and Impacts of Sustainable Land Management and Climate Smart Agricultural Practices (SLM-CSA) :Panel Data Evidence from the Ethiopian Highlands
(2017-08) Beyene, Abebe D; Mekonnen, Alemu; Kassie, Menale; Di Falco, Salvatore; Bezabih, Mintewab; Abebe D. Beyene, corresponding author, Environment and Climate Research Center, Ethiopian Development Research Institute, email: abebed2002@yahoo.co.uk. Alemu Mekonnen, Department of Economics, Addis Ababa University, email: alemu_m2004@yahoo.com. Menale Kassie, International Center of Insect Physiology and Ecology (ICIPE), P.O. Box 1041, 00621 Village, Market, Nairobi, Kenya, email: mkassie@icipe.org. Salvatore Di Falco, University of Geneva, Switzerland, email: Salvatore.DiFalco@unige.ch. Mintewab Bezabih Ayele, Environment and Climate Research Center, Ethiopian Development Research Institute. email: mintewab.ayele@gmail.com.
This paper analyzes the factors affecting adoption of sustainable land management and climate smart agricultural (SLM-CSA) practices (in particular tree planting, soil conservation and intercropping) and the effects of adoption on crop net revenue. We use two rounds of household and parcel level survey data collected from the East Gojjam and South Wollo Zones in the Amhara region of Ethiopia, in combination with spatially explicit climate data (rainfall and temperature). We use a multinomial endogenous switching regression model to understand the impacts of SLM-CSA practices on crop net revenue and we conduct a counterfactual analysis to compare the returns from various adaptation strategies. The results show the importance of household characteristics, physical characteristics of the farm, and climate-related factors in farm households’ decisions to adopt adaptation strategies. We also find that the adoption of SLM-CSA practices, either in isolation or in combination, can result in both positive and negative returns in crop net revenue. Tree planting has the best payoff among the practices considered in this study, either in isolation or in combination. The study also suggests that adoption of all three SLM-CSA practices does not necessarily result in better returns compared to other strategies considered in this study.
Interaction between Crop Insurance and Technology Adoption Decisions: The Case of Wheat Farmers in Chile
(2017-08) Salazar, César; Jaime, Mónica M; Pinto, Cristián; Acuña, Andrés; César Salazar, Corresponding Author, email: csalazar@ubiobio.cl, Department of Economics and Finance, and Applied Sectorial Economics Research Group (GI 160317/EF), Universidad del Bio-Bio. Mónica M. Jaime, School of Management and Business, Research Nucleus on Environmental and Natural Resource Economics (NENRE), University of Concepción. Cristián Pinto and Andres Acuña, Department of Economics and Finance, and Applied Sectorial Economics Research Group (GI 160317/EF), Universidad del Bio-Bio.
This paper examines relationships between crop insurance participation and input technology decisions among Chilean wheat farmers. Using nation-wide farm-level data from the National Agriculture and Forestry Census (INE 2007) a bivariate probit model is estimated. In this regard, we investigate the extent to which the adoption of certain production input technologies is associated with the participation of farmers in the state-promoted agriculture climate risk insurance program. We find that relationships between insurance and technology decisions are significant among family farmers, but this is not the case for large-scale farmers. Evidence also suggests that modern irrigation reduces the likelihood of adopting crop insurance, suggesting that Chilean farmers perceive these two options as substitutes. The latter implies that those using traditional irrigation methods preferentially participate in the insurance program, which can be taken as evidence of adverse selection in the Chilean insurance market.
High Daytime and Nighttime Temperatures Exert Large and Opposing Impacts on Winter Wheat Yield in China
(2017-07) Chen, Xiaoguang; Tian, Guoping; ∗ Xiaoguang Chen (corresponding author: cxg@swufe.edu.cn) and Guoping Tian, Research Institute of Economics and Management, Southwestern University of Finance and Economics, No. 55 Guanghuacun Street, Chengdu, China 610074.
We analyzed a provincial-scale data set of observed winter wheat yield, together with fine-scale daily weather outcomes from 1979 to 2011, to assess the responses of winter wheat yield in China to changes in the daytime temperature (Tmax) and the nighttime temperature (Tmin). Contrasting with the literature’s emphasis on a negative correlation between Tmin and wheat yield, we showed that winter wheat yield in China responded positively to higher Tmin, with the positive yield responses varying across wheat growing seasons. In line with the previous studies, we found that winter wheat yield exhibited negative responses to higher Tmax. These findings are useful for the development of China’s wheat-breeding programs and the design of efficient adaptation strategies in China’s grain sector to cope with future warming.
Consistent Negative Responses of Rice Yield in China to High Temperatures and Extreme Temperature Events
(2017-07) Chen, Xiaoguang; Chen, Shuai; Xiaoguang Chen (corresponding author), Research Institute of Economics and Management, Southwestern University of Finance and Economics, No. 55 Guanghuacun Street, Chengdu, China 610074. Email: cxg@swufe.edu.cn. Shuai Chen, China Academy for Rural Development (CARD), Zhejiang University, Hangzhou, China 310058. Email: shuaichen@zju.edu.cn.
We analyzed a county-level data set of rice yield and daily weather outcomes in China to examine the effects of high temperatures and extreme temperature events on rice yield. We found that (i) rice yield responded negatively to high temperatures (>29°C) and extreme temperature events, including cold and heat waves; (ii) rice yield exhibited highly nonlinear responses to temperature changes: rice yield increased with temperature up to 29°C and peaked with 1,550-1,800 growing degree-days; and (iii) holding current growing seasons and regions constant, average rice yield in China is projected to decrease by 11-50 percent by 2070 under future warming. These results imply that both warming and extreme temperature events pose major challenges for Chinese rice farmers, and that the effectiveness of adaptations will depend on how well they reduce the negative temperature impacts on rice yield on very hot and cold days.
Productive Efficiency and Its Determinants in a Changing Climate: A Monotonic Translog Stochastic Frontier Analysis
(2017-06) Mulwa, Richard; Kabubo-Mariara, Jane
The changing weather patterns and seasonal shifts are negatively impacting agricultural ecosystems and compromising the benefits from production of agricultural goods and services. Such impacts include reduced farm returns, reduced household incomes, increase in poverty levels, and reduction in farm productivity and efficiency. Using three waves of panel data, this study applies a monotonic translog stochastic frontier (SFA) to assess the overall farm efficiency and the influence of climatic factors, agro-ecological factors, and household factors on farm level efficiency. From the results, farming households are, on average, 63% efficient and could expand output by about 37% and still use the same level of inputs. However, this will be determined by a number of exogenous determinants such as climatic, agro-ecological, and household factors. Climatic factors such as rainfall and temperature decrease and increase inefficiency, respectively. The quasi-fixed factors of education and household size decrease and increase inefficiency, respectively, while age of the household head decreases inefficiency.
Adaptation to Climate Change and Variability and Its Implications for Household Nutrition in Kenya
(2017-06) Kabubo-Mariara, Jane; Mulwa, Richard M; Di Falco, Salvatore
Climate change and variability are affecting weather patterns and causing seasonal shifts with serious repercussions for households and communities in Kenya. The livelihoods of the majority of Kenyans are therefore threatened due to the potential adverse impacts of climate change, such as declining production and productivity, which could lead to food insecurity. To mitigate the negative impacts of climate change and variability, farmers need to adopt different strategies, such as new crop varieties, crop and livestock diversification, and water-harvesting technologies. These climate change adaptation strategies are expected to influence the level of food production (hence food security) in the country, and therefore their linkages with food security in Kenya need to be studied. It is against this background that this study was undertaken to assess factors influencing climate change adaptation and the implications of adaptation for nutrition, measured in kilocalories (Kcal) produced. To accomplish this task, an endogenous switching regression model is applied to household survey data of 708 households from 38 counties in Kenya. The results demonstrate that mean temperature does not influence Kcal production but increased precipitation can negatively or positively influence Kcal production, depending on whether it rains during harvest, land preparation or crop growing periods. Households living in areas with different soil types are likely to produce varying quantities of Kcal depending on the soil type. This requires intervention in improving soil fertility, alongside adopting crop enterprises suitable for these areas. In addition, older and more experienced farmers will produce more nutrition compared to younger farmers with little farming experience. Finally, it is shown that farmers who adapted to climate change produced 1,305,414 Kcal against 564,789 Kcal for households that did not adapt. The treatment effects results show that farm households that actually adapted would have produced about 996,224 Kcal less (that is, about 23.7% less) if they had not adapted. By contrast, if farmers who did not adapt had adapted, they would have produced about 773,879 Kcal more (that is, about 27.01% more). Thus, adaptation to climate change significantly increases production of nutrition.
Credit, Insurance, and Farmers’ Liability
(2017-03) Naranjo, Maria Angelica; Pieters, Janneke; Alpízar, Francisco
To cope with losses from extreme hydro-meteorological events, governments typically implement disaster relief programs and offer debt relief to affected parties. Governments in developing countries have made extensive use of total and partial debt coverage as a way to encourage investment in key sectors and in agriculture in particular. In the context of climate change, such practices are not viable because risk is systemic and losses can easily surpass most governments’ debt relief budgets. Insurance is an obvious alternative, but insurance uptake in developing countries is typically low, and little is known about the interaction between investment, insurance, and debt relief programs, which effectively reduce borrowers’ liability. This paper examines the effect of farmers’ liability on demand for credit with and without insurance. We test predictions of a theoretical model in a lab in the field experiment with coffee farmers in Costa Rica. Farmers choose how much to invest in six different settings, described on the one hand by whether the loan is insured or not, and on the other by the probability that the government provides full debt relief. As expected, uptake of loans with insurance is significantly higher than without insurance when farmers are fully liable, and insurance is not relevant for investments if debt relief is guaranteed. Interestingly, uncertainty about liability is enough to trigger the uptake of insured debt. Our results suggest that well-defined rules for disaster relief are needed to support development of insurance markets.
The Tilling of Land in a Changing Climate:Panel Data Evidence from the Nile Basin of Ethiopia
(2017-03) Teklewold, Hailemariam; Mekonnen, Alemu; Environment and Climate Research Center(EfD-Ethiopia)
Empirical studies point to reduced tillage as a means to increase yields and reverse land degradation. A relatively neglected avenue of research concerns why farmers increase tillage frequencies. Using household plot–level panel data from the Nile Basin of Ethiopia, this article applies a random effects ordered probit endogenous switching regression model to empirically investigate the impact of weather events and other conditioning factors on farmers’ choice of tillage intensity and the effect of changing tillage frequencies on differences in farm returns. Results indicate that, while low-frequency tillage is more likely in drier areas, plot-level shocks (such as pests and diseases) are key variables in the choice of high-frequency tillage. Adoption of a low-till approach leads to increasing farm returns in low-moisture areas but high-frequency tillage provides higher returns in high-rainfall areas. Understanding how farmers’ tillage options correlate with climatic conditions and farm economies is salient for developing effective adaptation and mitigation plans

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