Managing Environmental Risk in Presence of Climate Change: The Role of Adaptation in the Nile basin of Ethiopia
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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 (i) past adaptation to climate change adaptation reduces current downside risk exposure, and
so the risk of crop failure; (ii) climate change adaptation would have been more beneficial to the nonadapters
if they adapted, in terms of reduction in downside risk exposure; and (iii) climate change
adaptation is a successful risk management strategy that makes the adapters’ more resilient to climatic
conditions.