THE ROBUSTNESS OF SINGLE INDEX MODELS IN CROP MARKETS: A MULTIPLE INDEX MODEL TEST

The single index model (SIM), developed for analysis of financial assets, is assessed as a tool for evaluating the risk-return tradeoff faced in agricultural enterprise selection. This study tests whether some of the hypotheses underlying the SIM are valid when the SIM is used in agricultural cropping decisions. Empirical evidence from county level data does not support SIM hypotheses, indicating that more robust results might come from multiple index models.Agricultural Finance, Risk and Uncertainty,

Assessing farmer behaviour as affected by policy and technological innovations: bio-economic farm models

Farm Management,

Understanding the investment and abandonment behavior of poor households: An empirical investigation

"This paper uses models of irreversible investment under uncertainty to examine the investment and abandonment behavior of poor rural households. It considers the decision of Ugandan coffee-farming households to invest in or abandon coffee trees. The observed levels of investment and abandonment are found to be consistent with models of investment that allow for irreversibility, uncertainty, fixed costs and liquidity constraints. The findings highlight the importance of addressing volatility, irreversibility, fixed costs and liquidity constraints in order to increase households' responsiveness to changes in the fundamentals, and to enable households to recover from shocks to their capital stock." from Author's AbstractInvestment, Uncertainty, Fixed costs, Shocks, Models of friction, High-value agriculture,

Weather Vulnerability, Climate Change, and Food Security in Mt. Kilimanjaro

This study estimates the impact of rainfall variation on livelihood in Mt. Kilimanjaro using the Ricardian approach to capture farmers’ adaptation strategies to cope with climate change risks. The data for the analysis were gathered from a random sample of over 200 households in 15 villages and precipitation from rainfall observation posts placed in each of the surveyed villages. The precipitation data provide information on the effect of moisture at critical months in the growing season. Due to prevalence of intercropping among local farmers, the present study develops a multivariate model that assumes endogeneity between crop yields. Doing so allows the study to capture adaptation strategies that smallholders use by diversifying farm portfolio. The results indicate that Mt. Kilimanjaro agriculture is vulnerable to precipitation variation. However, farm vulnerability is heterogeneous across space, crops and, months. Location varying inputs are responsible for substantial percentage of crop yield. The study found ambiguous evidence about the ability of irrigation usage to reduce crop vulnerability to precipitation variation, but suggests that proper cost benefit analysis ought to be done in order to measure the welfare value of irrigation. In terms of future food security, climate simulations reveal that by 2029, it will no longer be ideal to produce coffee in Mt. Kilimanjaro if precipitation annually decreases by a minimum rate of 2%. While maize production will also suffer severe production reduction, banana production will decrease but not in an alarming rate by 2029.Climate Change, Precipitation Variability, Food Security, Irrigation, Agricultural and Food Policy, Environmental Economics and Policy, Food Security and Poverty, International Development, Q1, Q5,

WATER COMMUNITIES IN THE REPUBLIC OF MACEDONIA: AN EMPIRICAL ANALYSIS OF MEMBERSHIP SATISFACTION AND PAYMENT BEHAVIOUR

The performance of Water Communities (WCs), a form of self-managing organisation for irrigation, in the Bregalnica region of the Republic of Macedonia is investigated. Analysis, drawing on primary survey data, focuses on the decision of farmers to join a WC (Heckman selection probit model), determinants of farmers’ satisfaction with their membership of WCs (ordered probit model) and factors associated with changes in farmers’ water payment behaviour (non-parametric CLAD model). Key determinants identified include transparency and trust with respect to the structure and operation of the WC, cost recovery rates, farm size and irrigation costs. Membership satisfaction is an important determinant of payment behaviour. Lessons for sustainable self-management are drawn.Irrigation, Self-management, Water User Associations, Eastern Europe, Macedonia,

An experiment on the impact of weather shocks and insurance on risky investment

We conduct a framed field experiment in rural Ethiopia to test the seminal hypothesis that insurance provision induces farmers to take greater, yet profitable, risks. Farmers participated in a game protocol in which they were asked to make a simple decision: whether to purchase fertilizer, and if so, how many bags. The return to fertilizer was dependent on a stochastic weather draw made in each round of the game protocol. In later rounds of the game protocol, a random selection of farmers made this decision in the presence of a stylized weather-index insurance contract. Insurance was found to have some positive effect on fertilizer purchases. Purchases were also found to depend on the realization of the weather in the previous round. We explore the mechanisms of this relationship and find that it may be the result of both changes in wealth weather brings about and changes in perceptions of the costs and benefits of fertilizer purchases.Fertilizer, field experiment, hypothesis, input response, Insurance,

Water Communities in the Republic of Macedonia: an empirical analysis of membership satisfaction and payment behaviour

The performance of Water Communities (WCs), a form of self-managing organisation for irrigation, in the Bregalnica region of the Republic of Macedonia is investigated. Analysis, drawing on primary survey data, focuses on the decision of farmers to join a WC (Heckman selection probit model), determinants of farmers’ satisfaction with their membership of WCs (ordered probit model) and factors associated with changes in farmers’ water payment behaviour (non-parametric CLAD model). Key determinants identified include transparency and trust with respect to the structure and operation of the WC, cost recovery rates, farm size and irrigation costs. Membership satisfaction is an important determinant of payment behaviour. Lessons for sustainable self-management are drawn.Irrigation, Self-management, Water User Associations, Resource /Energy Economics and Policy,

Do Climate Shocks Affect Smallholder Farmers’ Conservation Practices? Evidence from Peru

Peruvian agriculture is estimated to be subject to the greatest impacts of climate change in South America. Resulting shifts in rainfall patterns and extreme temperature realizations impose more frequent abnormal weather shocks on farmers and their production decisions. I study the impact of such shocks on agricultural practice choices of farmers growing two main staples, maize and potato; namely, I analyze adoption of practices reducing soil degradation, practices aimed towards water conservation, and application of inorganic fertilizer. I utilize unique cross-sectional data from Peru National Agricultural Survey over the years 2014 to 2016 in conjunction with long-term climate data, and construct georeferenced shocks posed by unusual rainfall levels as well as unusual variation by using a novel approach in the literature. I then apply fixed effects estimation to analyze how experienced shocks and, plausibly, changed perception regarding the riskiness of their environment affect farmers’ choice of practices over an agricultural year following a shock(s). My analysis shows that soil practices’ adoption is not sensitive to previous year’s shocks but increases after multiple years abnormal rainfall, while rate of fertilizer users goes up by 7 to 9 percentage points following a drought year. Use of water conservation measures decreases drastically after years of abnormally high rainfall or low variability of it. I find limited heterogeneities in responses