The roles of risk aversion and climate-smart agriculture in climate risk management: Evidence from rice production in the Jianghan Plain, China
2019
Tong, Qingmeng | Swallow, Brent | Zhang, Lu | Zhang, Junbiao
Under pressure to ensure national food security, China’s rice sector needs to adapt to changing climatic conditions. By investigating the effect of farmer’s risk preferences, adoption of climate-smart agricultural practices and use of crop insurance on technical efficiency of rice production, this paper explores climate-smart agriculture as a strategy to cope with climate risk challenges. The empirical investigation adopts a stochastic frontier analysis approach which allows simultaneous estimation of a production function and identification of factors associated with technical efficiency. Data for rice plots of 873 farmers in the Jianghan Plain of China are used to fit the model. Farmers’ risk preferences are measured using a standard experiment approach. Most respondents are found to be risk averse, and greater risk aversion is found to significantly decrease technical efficiency. Using climate-smart practices – crop rotations and conservation tillage – have the extra benefit of improving technical efficiency; crop insurance has no significant effect on technical efficiency. Overall, the results shed new light on the negative role of risk aversion on China’s agriculture, and the multiple benefits of climate-smart practices in creating a stronger agricultural production system that is resilient to climate risks.
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