Article
Reference
How can african agriculture adapt to climate change?: a
counterfactual analysis from Ethiopia
DI FALCO, Salvatore, VERONESI, Marcella
DI FALCO, Salvatore, VERONESI, Marcella. How can african agriculture adapt to climate
change?: a counterfactual analysis from Ethiopia. Land Economics, 2013, vol. 89, no. 4, p.
743-766
DOI : 10.1353/lde.2013.0043
Available at:
http://archive-ouverte.unige.ch/unige:42235
Disclaimer: layout of this document may differ from the published version.
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How Can African Agriculture Adapt to Climate Change?: A Counterfactual
Analysis from Ethiopia
Salvatore Di Falco, Marcella Veronesi
Land Economics, Volume 89, Number 4, November 2013, pp. 743-766 (Article)
Published by University of Wisconsin Press
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How Can African Agriculture Adapt to Climate
Change? A Counterfactual Analysis from Ethiopia
Salvatore Di Falco and Marcella Veronesi
ABSTRACT. We analyze the impact of different ad-
aptation strategies on crop net revenues in the Nile
Basin of Ethiopia. We estimate a multinomial endog-
enous switching regression model of climate change
adaptation and crop net revenues and implement a
counterfactual analysis. Households data are com-
bined with spatial climate data. We find that adap-
tation to climate change based upon a portfolio of
strategies significantly increases farm net revenues.
Changing crop varieties has a positive and significant
impact on net revenues when coupled with water con-
servation strategies or soil conservation strategies,
but not when implemented in isolation. (JEL Q54,
Q56)
I. INTRODUCTION
Effective adaptation of agriculture to cli-
mate change is crucial to achieve food security
in Sub-Saharan Africa (Lobell et al. 2011).
This part of Africa is characterized by millions
of small-scale subsistence farmers who farm
land and produce food in extremely challeng-
ing conditions. The production environment is
characterized by a joint combination of low
land productivity andharsh weather conditions
(i.e., high average temperature and scarce and
erratic rainfall). These result in very low yields
of food crops, and food insecurity. Because of
the low level of economic diversification and
reliance on rain-fed agriculture, Sub-Saharan
Africa’s development prospects have been
closely associated with climate. Climate
change is projected to further reduce food se-
curity (Rosenzweig and Parry 1994; Parry, Ro-
senzweig, and Livermore 2005; Cline 2007;
Lobell et al. 2008; Schlenker and Lobell 2010).
For instance, the fourth Intergovernmental
Panel on Climate Change (IPCC) suggests that
Land Economics • November 2013 • 89 (4): 743–766
ISSN 0023-7639; E-ISSN 1543-8325
䉷 2013 by the Board of Regents of the
University of Wisconsin System
at lower latitudes, in tropical dry areas, crop
productivity is expected to decrease “for even
small local temperature increases (1–2 ⬚C)”
(IPCC 2007, 51). In many African countries
access to food will be severely affected;“yields
from rain-fed agriculture could be reduced by
up to 50% by 2020” (IPCC 2007, 10). Future
warming seems unavoidable. Current agree-
ments to limit emissions, even if implemented,
will not stabilize atmospheric concentrations
of greenhouse gases and climate change.
Farmers will thus still face a warmer produc-
tion environment.
The identification of climate change adap-
tation strategies is therefore vital in Sub-
Saharan Africa.
1
These strategies can indeed
buffer against the implications of climate
change and play an important role in reducing
the food insecurity of farm households. While
the importance of adaptation is widely ac-
cepted, our understanding on how to adapt
(and its economic impact) is still quite weak.
Adaptation is a complex phenomenon com-
prising different strategies that may play an
important role in supporting the welfare of
farm households. There are different measures
that, in principle, farmers can adopt to address
climate change, for instance, switching crops,
1
Countries at low latitudes are predicted to bear three
to four times the climate change damages (Mendelsohn and
Dinar 2003). The effect of warming on agricultural systems
in temperate countries is instead projected to be positive.
This identifies losers and winners as results of global warm-
ing (Mendelsohn, Dinar, and Williams 2006).
The authors are, respectively, professor, Department
of Economics, University of Geneva, Geneva, Swit-
zerland, and visiting senior fellow, Grantham Re-
search Institute on Climate Change and the Environ-
ment, London School of Economics, London, U.K.;
and assistant professor, Department of Economics,
University of Verona, Verona, Italy, and Institute for
Environmental Decisions, ETH Zurich, Zurich, Swit-
zerland.
November 2013Land Economics744
adopting water-harvesting technologies, or
adopting conservation measures to retain soil
moisture. Farmers can implement these mea-
sures in isolation or in combination.
In this study, we analyze and compare the
role of different adaptation strategies to answer
the following research questions: What are the
factors affecting the adoption of strategies in
isolation or in combination? What are the
“best” strategies that can be implemented to
deal with climatic change in the field? In par-
ticular, what are the economic implications of
different strategies? To answer these questions
is important to make the adaptation process ex-
plicit. The basic premise of this paper is that a
possible way to understand the role of adap-
tation is to study farmers mitigating responses
to impacts of changes to date. Adaptation to
changing climatic conditions is not, in fact, a
new process. Farmers have constantly imple-
mented adjustments to cope with the vagaries
of climatic conditions. Thus, understanding
the impacts of past adaptation can help us
gauge the importance of these strategies in the
face of future climate change. In addition, a
farm-level perspective can be particularly use-
ful to inform us of the barriers and drivers be-
hind the different adaptation strategies.
We contribute to the existing literature on
climate change in agriculture in three ways.
First, we disentangle the economic implica-
tions of different climate change adaptation
strategies within a Ricardian framework.
2
This is within the spirit of the so-called struc-
tural Ricardian analysis (pioneered by Seo
and Mendelsohn 2008a, 2008b; Seo 2010;
Kurukulasuriya and Mendelsohn 2008).
3
In
particular, we investigate whether implement-
ing these strategies in combination is more ef-
fective than implementing them individually.
Second, we identify the most successful strat-
egies by implementing a counterfactual anal-
ysis. This provides information on what farm
2
Di Falco, Veronesi, and Yesuf (2011) follow a similar
approach; however, they focus on the binary choice of adapt-
ing or not adapting to climate change, without distinguishing
the effect of different strategies.
3
Differently from these studies we do not look at types
of farms (specialized vs. mixed), livestock switching, or a
specific technology adoption such as irrigation. We instead
map the full set of actual adaptation strategies implemented
by individual farms.
households would have earned if they had not
adapted a particular strategy. Third, we add
some empirical evidence from Ethiopia on
farmers’ climate change adaptation strategies
to a number of country-specific studies (e.g.,
Seo and Mendelsohn 2008a, 2008b, 2008c,
2008d; Deressa et al. 2009; Kurukulasuriya,
Kala, and Mendelsohn 2011).
We have access to a unique database on
Ethiopian agriculture to answer our research
questions. One of the survey instruments was
specifically designed to investigate farmers’
climate change perception and adaptation.
Specifically, farmers were asked what adjust-
ments they made in response to long-term
shifts in temperature and/or rainfall. Farmers
in the study sites have undertaken a number
of adaptation measures including changing
crop varieties, adopting soil conservation
measures, and adopting water-related strate-
gies such as water harvesting and water con-
servation. These adaptation measures account
for more than 95% of the measures followed
by the farm households that actually under-
took an adaptation measure.
4
Farmers’ decision to adapt and what strat-
egy to adopt is voluntary and based on indi-
vidual self-selection. Farm households that
adopted a particular strategy are not a random
sample of the original population; they may
have systematically different characteristics
from farm households that did not adapt or
adopted a different strategy. Unobservable
characteristics of farmers and their farm may
affect both the adaptation strategy decision
and net revenues, resulting in inconsistent es-
timates of the effect of adaptation on net rev-
enues. For example, if only the most skilled
or motivated farmers choose to adapt or
choose the most profitable strategy, then self-
selection bias can affect the estimates. In ad-
dition, observable variables may have differ-
ent marginal effects on net revenues within
the context of different strategies.
We address these issues by estimating a
multinomial endogenous switching regression
model of climate change adaptation and crop
4
It should be stressed that livestock and agroforestry
practices can also be important in the context of adaptation
to climate change. Future research should be devoted to the
analysis of these other strategies.
89(4) Di Falco and Veronesi: African Agriculture and Climate Change 745
net revenues by a two-stage procedure that al-
lows us to produce selection-corrected net rev-
enues. In the first stage, we use a selection
model where a representative farm household
chooses to implement a specific strategy, while
in the second stage the information stemming
from the first step is used in a Ricardian model
(Mendelsohn, Nordhaus, and Shaw 1994)
where farm net revenues are regressed against
climatic variables and other control variables.
5
Climatic variables such as rainfall and tem-
perature at the household level were con-
structed via the thin plate spline method of spa-
tial interpolation. This method imputes the
farm-specific values using latitude, longitude,
and elevation information of each farm house-
hold (see Wahba 1990 for details).
The inclusion of these climatic variables is
essential to estimate the Ricardian model. The
availability of climatic variables can also be
useful to test whether the strategies were im-
plemented in response to climate change. We
use as selection instruments in the net revenue
functions the variables related to past experi-
ence of extreme weather events (e.g., flood,
drought, hailstorm) and past information
sources (e.g., government extension, farmer-
to-farmer extension, information from radio,
and, if received, information particularly on
climate). We establish the admissibility of
these instruments by performing a simple fal-
sification test: if a variable is a valid selection
instrument, it will affect the decision of
choosing an adaptation strategy, but it will not
affect the net revenue per hectare among farm
households that did not adapt (Di Falco,
Veronesi, and Yesuf 2011).
We find that adaptation to climate change
based upon a combination of strategies has a
significant positive effect on farm net reve-
nues, as opposed to strategies adopted in iso-
lation.
II. BACKGROUND
Ethiopia’s GDP is closely associated with
the performance of its rain-fed agriculture
(Deressa and Hassan 2010). For instance,
5
It should be stressed that the adoption of new practices
may be driven by consumption preferences or risk manage-
ment. We acknowledge this potential limitation in our study.
about 40% of national GDP, 90% of exports,
and 85% of employment stem from the agri-
cultural sector. The rain-fed production envi-
ronment is characterized to a large extent by
land degradation and very erratic and variable
climate. Historically, rainfall variability and
associated droughts have been major causes
of food shortage and famine in Ethiopia. The
success of the agricultural sector is crucially
determined by the productivity of smallholder
farm households. They account for about 95%
of the national agricultural output, of which
about 75% is consumed at the household level
(World Bank 2006). With a minimally diver-
sified economy and reliance on rain-fed agri-
culture, Ethiopia’s development prospects
have been thus associated with climate. For
instance, the World Bank (2006) reported that
catastrophic hydrological events such as
droughts and floods have reduced its eco-
nomic growth by more than a third.
The frequency of droughts has increased
over the past few decades, especially in the
lowlands (Lautze et al. 2003; NMS 2007). A
study undertaken by the national meteorolog-
ical service (NMS 2007) highlights that an-
nual minimum temperature has been increas-
ing by about 0.37 degrees Celsius every 10
years over the past 55 years. Rainfall has been
more erratic, with some areas becoming drier
but others becoming relatively wetter. These
findings point out that climatic variations have
already happened. The prospect of further cli-
mate change can exacerbate this very difficult
situation. Climate change is indeed projected
to further reduce agricultural productivity
(Rosenzweig and Parry 1994; Parry, Rosen-
zweig, and Livermore 2005; Cline 2007).
Most climate models converge in forecasting
scenarios of increased temperatures for most
of Ethiopia (Dinar et al. 2008).
III. SURVEY AND DATA DESCRIPTION
This study relies on a survey conducted in
2004 and 2005 on 1,000 farm households in
the Nile basin of Ethiopia (IFPRI 2010), one
of the countries most vulnerable to climate
change and with the least capacity to respond
(Orindi et al. 2006; Stige et al. 2006). The Nile
basin is a very large area covering roughly
one-third of the country. The sampling frame