CLIMATE UNCERTAINTY AND AGRICULTURAL SOIL CONSERVATION INVESTMENT DECISIONS

Pierre D. Ouattara (), Eugene Kouassi (), Aklesso Y. G. Egbendewe and Oluyele Akinkugbe ()
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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

Climate Change Economics (CCE), 2018, vol. 09, issue 02, 1-23

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.

Keywords: Uncertainty; climate; investment; soil conservation (search for similar items in EconPapers)
Date: 2018
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DOI: 10.1142/S2010007818500045

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