Solomon Asfaw1, Manuela Coromaldi2 and Leslie Lipper1
This paper explores the impact of climate risk on the adoption of risk decreasing practices and other input choices and evaluates their impact on subjective and objective measures of household welfare (namely net crop income and a food insecurity indicator). The analysis is conducted primarily using a novel data set that combines data from the large- scale and representative Ethiopia Socioeconomic Survey (ERSS), 2011/12 with historical climate and biophysical data. We employ a multivariate probit model on plot level observations to model simultaneous and interdependent adoption decisions and utilize a conditional mixed process estimator (CMP) and instrumental variable (IV) method for the impact estimates. Findings show that there is interdependency between the adoption decisions of different farm management practices which may be attributed to complementarities or substitutability between the practices. Greater riskiness, reflected in the coefficients of variation and higher temperature, increases use of risk reducing inputs such as climate-smart agriculture (CSA) inputs, but decrease use of modern inputs such as chemical fertilizer. Even if higher climate risk does generate higher incentive to adopt, results also confirm the importance of other conventional constraints to adoption that need to be addressed. Yield enhancing inputs such as chemical fertilizer and improved seed are mainly adopted by wealthier households and households having access to credit and extension services whereas risk reducing inputs are frequently used by households with lower level of wealth and limited access to credit and households with stable land tenure. Moreover, the CMP and IV estimations showed that the adoption of CSA and modern inputs have positive and statistically significant impacts on the objective measure of food security (net crop income) but no impact is observed for the subjective food security indicator.