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Managing Environmental Risk in Presence of Climate Change: The Role of Adaptation in the Nile Basin of Ethiopia

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  • Salvatore Di Falco
  • Marcella Veronesi
Abstract
This study investigates the impact of climate change adaptation on farm households’ downside risk exposure in the Nile Basin of Ethiopia. The analysis relies on a moment-based specification of the stochastic production function. We use an empirical strategy that accounts for the heterogeneity in the decision on whether to adapt or not, and for unobservable characteristics of farmers and their farm. We find that past adaptation to climate change (i) reduces current downside risk exposure, and so the risk of crop failure; (ii) would have been more beneficial to the non-adapters if they adapted, in terms of reduction in downside risk exposure; and (iii) is a successful risk management strategy that makes the adapters more resilient to climatic conditions. Copyright Springer Science+Business Media Dordrecht 2014

Suggested Citation

  • 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.
    • Handle: RePEc:kap:enreec:v:57:y:2014:i:4:p:553-577
    DOI: 10.1007/s10640-013-9696-1
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    More about this item

    Keywords

    Adaptation; Climate change; Downside risk exposure; Environmental risk; Ethiopia; D80; Q18; Q54;
    All these keywords.

    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare 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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