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The Role of Risk in the Context of Climate Change, Land Use Choices and Crop Production: Evidence from Zambia

Vernon Smith, Alessandro (Alex) De Pinto () and Richard Robertson ()

No 277315, 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia from International Association of Agricultural Economists

Abstract: This study examines the empirical importance of the effects of the risk environment on the impacts of climate change on farm land allocations and consequent effect on agricultural output in Zambia. We use a discrete-choice model consistent with a mean-variance utility function to model farm-level land allocations among alternative crops. Results indicate that risk-reducing decisions reinforce the trend to shift away from maize production in response to climate change impacts on mean temperatures and precipitation. The opportunity cost of these decisions is explored through a simulation scenario in which yield variability is reduced to zero. Important conclusions can be derived from this analysis. First, when the economic effects of climate change are considered, decision-making under uncertainty and risk should be at the forefront of the problems that issues that need to be addressed. Second, concentrating on farm-level effects of responses to climate change is not sufficient. To understand the economy wide consequences of climate change, the aggregate effects of individual decisions should be assessed. Third, results indicate that increased efforts in risk management and in policies aiming at reducing risk can lead to significant positive outcomes. Acknowledgement : This work was supported by a grant from the Bureau of Food Security at the United States Agency for International Development (USAID). This work was implemented as part of the CGIAR Research Program on Climate Change, Agriculture and Food Security (CCAFS), which is carried out with support from CGIAR Fund Donors and through bilateral funding agreements. For details please visit donors. The authors take sole responsibility for the opinions expressed within this study.

Keywords: Crop; Production/Industries (search for similar items in EconPapers)
Date: 2018-07
New Economics Papers: this item is included in nep-agr, nep-env and nep-upt
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DOI: 10.22004/ag.econ.277315

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