22 pages, Commercialisation of smallholder agriculture is important for rural economic growth. While previous studies have analysed effects of commercialisation on productivity and income, implications for farm household nutrition have received much less attention. We evaluate the effects of commercialisation on household food security and dietary quality with a special focus on calorie and micronutrient consumption. We also examine transmission channels by looking at the role of income, gender, and possible substitution effects between the consumption of own-produced and purchased foods. The analysis uses survey data from farm households in Kenya and a control function approach. Generalised propensity scores are employed to estimate continuous treatment effects. Commercialisation significantly improves food security and dietary quality in terms of calorie, zinc and iron consumption. For vitamin A, effects are insignificant. Commercialisation contributes to higher incomes and increased nutrients from purchased foods, but it does not reduce the consumption of nutrients from own-produced foods. Enhancing market access is important not only for rural economic growth, but also for making smallholder agriculture more nutrition-sensitive.
22 pages, Raising agricultural productivity in developing countries is often said to reduce poverty more than comparable growth arising from other sectors. This claim has frequently been based on casual theorising, rather than empirical evidence. Productivity growth generates additional income and must benefit someone, though not necessarily the poor. It is conceivable that most, or even all of the benefits might go to others. Using region-level data from Thailand, we study the relationship between agricultural productivity growth and rural poverty incidence. The dependent variable for our regression analysis is the annual rate of change in rural poverty incidence at the regional level between the years for which poverty data are available. Agricultural productivity is measured as the annual rate of change in regional total agricultural productivity, covering the same time intervals as the poverty observations, but lagged one calendar year. Other control variables include regional non-agricultural incomes and the real price of food. The estimated coefficient on the change in agricultural productivity is negative and highly significant, implying that agricultural productivity growth does reduce rural poverty, holding other variables constant, though not more so than non-agricultural sources of income growth. The poverty-reducing contribution of recent agricultural productivity growth has been small. The poverty-reducing effects of long-term drivers of agricultural productivity growth are also analysed, using simulations based on the estimated model.
18pgs, This analysis investigates the potential mechanisms and the practical significance of agricultural value chain development in a geographically challenging rural area of a developing country. Using data from a carefully designed primary survey administered in a hill and mountainous region in Western Nepal, we show that linking small-scale producers to regional and local traders can help increase income. Analysis of impact pathways shows that the positive impact on household income emerges through higher agricultural income, driven by higher sale volume at lower prices. Focusing on high value commodities in rural areas, where arable land is not always fully exploited or utilized, appears to lead to acreage expansion and some crop switching, contributing to higher supply albeit at lower prices. The positive impact on household income is practically significant; it helps improve household food security and asset accumulation. These findings are robust to alternative specifications. Targeted value chain interventions that strengthen and stabilize small-scale producers’ access to markets can contribute to rural poverty reduction via increase in agricultural income.
16 pages, There is growing evidence that religiosity affects important socio-economic outcomes. A potential channel through which religiosity affects these outcomes is by shaping individuals’ risk preferences. We combine a lab-in-the-field experiment, survey, and focus-group discussions to investigate the effect of religiosity on risk-taking among rural people in Ethiopia. We find evidence that religious farmers are more risk-taking. The effect is likely driven by the trust/belief in God as the omniscient and just power in determining outcomes under uncertainty. This is further corroborated by results from follow-up focus-group discussions.
29 pages, Agent-based models are important tools for simulating farmers’ behaviour in response to changing environmental, economic or institutional conditions and policies. This article introduces an agent-based modelling approach that combines behavioural factors with standard bio-economic modelling of agricultural production. More specifically, our framework integrates the cumulative prospect theory and social interactions with constrained optimisation decisions in agricultural production. We apply our modelling approach to an exemplary bio-economic model on the assessment of weed control decisions. Results show the effects of heterogeneous farm decision-making and social networks on mechanical weed control and herbicide use. This framework provides a generic and conceptually sound approach to improve the scope for representing farmers’ decision-making and allows the simulation of their decisions and recent advances in behavioural economics to be aligned with existing bio-economic models of agricultural systems.
14pgs, As an unobservable attribute, food safety is likely to be under-provided by markets where regulatory enforcement is weak. In such settings, stimulating consumer demand for safer food can potentially encourage market actors to invest in food safety. Through a randomized trial in Kenya, we test the impact of informing consumers about which maize flour brands are most likely to comply with the regulatory standard for aflatoxin, a carcinogenic fungal byproduct. Providing information on safer brands alone does not significantly affect consumption behavior. However, when the same information is combined with a test performed on the maize flour stocked by the household, the likelihood that a safer brand is consumed 2 months later is 76% higher than in the comparison group. Our findings suggest that providing information on the relative riskiness of substitute foods could encourage consumers to make safer choices.
Saweda O. Liverpool-Tasie, Lenis (author), Salim Nuhu, Ahmed (author), Awokuse, Titus (author), Jayne, Thomas (author), Muyanga, Milu (author), Aromolaran, Adebayo (author), and Adelaja, Adesoji (author)
Format:
Journal article
Publication Date:
2022-04-19
Published:
United States: Wiley Online
Location:
Agricultural Communications Documentation Center, Funk Library, University of Illinois Box: 205 Document Number: D12576
27pgs, In spite of mounting evidence about the growth of medium-scale farms (MSFs) across Africa, there is limited empirical evidence on their impact on neighbouring small-scale farms (SSFs). We examine the relationships between MSFs and SSFs, with particular focus on the specific mechanisms driving potential spillover effects. First, we develop a theoretical model explaining two propagating mechanisms: learning effects (training) and cost effects (reduced transactions cost). An empirical application to data from Nigeria shows that SSFs with training from MSFs tend to use higher levels of modern inputs (have higher productivity), and receive higher prices and income. The results also show that purchasing inputs from MSFs reduces the costs of accessing modern inputs and is associated with higher inorganic fertiliser use by SSFs. Our results suggest that the benefits of receiving training and purchasing inputs from MSFs are particularly important for very small-scale producers, operating less than 1 hectare of land. This implies that policies which promote the efficient operation of MSFs and encourage their interaction with SSFs can be an effective mechanism for improving the productivity and welfare of smallholder farms, hence reducing their vulnerability to extreme poverty.
15 pages, Increasing popularity of economic experiments for policy impact analysis has led to an on-going debate about the suitability of students to substitute professionals as experimental subjects. To date, subject pool effects in agricultural and resource economics experiments have not been sufficiently studied. In order to identify differences and similarities between students and non-students, we carry out an experiment in the form of a multi-period business management game that is adapted to an agri-environmental context. We compare the compliance behaviour of German agricultural students and German farmers with regard to water protection rules and analyse their responses to two different green nudge interventions. The experimental results reveal that the direction of the response to the policy treatments is similar. Even unexpected behaviour could be reproduced by the student sample. Nevertheless, the magnitude of the treatment effects differed between the two samples. This implies that experimenters in the field of agricultural and resource economics could use the subject pool of students to analyse the direction of nudge policies. If predictions should be made about the magnitude effects, we suggest using a professional subject pool.
18 pages, Government interventions in the agricultural sector have been historically justified by the existence of an income disparity between farmers and non-farmers. However, recent studies have found that such disparity is disappearing over time, particularly in the United States. This work offers the first longitudinal systematic assessment on the average income disparity between farm and non-farm units in the European Union, differentiating between old and new Member States. Using the EU-SILC dataset, both broad (having some farm income) and narrow (living mainly on agriculture) farm households are compared with a general sample of non-farm households and a more restricted sample of self-employed non-farm households. To control for household observable characteristics and time-constant unobserved factors, we use a fixed effects regression. Results suggest that the farm/non-farm income disparity has disappeared in the European Union unless we compare narrow farm households with all non-farm households: in this case, the former are more likely to be better off than the latter. A limited income disparity is found only in the case of new Member States for broad farm households only. Results are used to draw policy implications regarding the role of CAP in supporting farm income.
18 pages, Recent studies cast doubt on the ability of abstract experiments to predict decision-making in the field. Thus, scholars have argued for more ‘realism’ by introducing context to field experiments. Yet, such realism may work against the induced values of monetary incentives in economic experiments. It is an open question whether contextual framing works best with or without inducing values, through methods such as the use of monetary incentives. Using a sample of 146 German farmers, we compare experimentally the predictive power of a framed lottery in an agricultural context vs. using an abstract version. For one half of the sample, lotteries are incentivised; for the other half, they are hypothetical. Although risk preferences differ between treatments, all four lottery tasks correlate poorly with farmers’ real-world use of risk management instruments such as harvest or hail insurance. Subjects who start with an agricultural framing are willing to take significantly greater risks in the lotteries. More generally, our findings cast doubt on the ability of lottery tasks to predict risk-taking in the field.
11 pages, While cow's milk and plant-based milk are often hypothesized to be substitutes, much remains unknown about the impacts that plant-based milks have on the retail price for cow's milk, if any. We explore the individual retail price relationship between two plant-based milks, almond and soy, with cow's milk. If the markets are cointegrated, and shocks in the plant-based markets affect the cow's milk market, it can add volatility to cow's milk prices, which could have implications for costs and benefits of the USDA Dairy Margin Coverage Program and price calculations by the Federal Milk Marketing Orders (FMMO). However, while we find evidence that plant-based milk prices react to shocks in cow's milk prices, we do not find evidence that cow's milk prices respond to changes in plant-based milk prices.
28 pages, We analyse gender differences in the response of smallholder farmers to droughts, taking the duration and severity of the even t into account. Using a novel weather shock measure that combines spatial rainfall data with detailed cropping calendars, survey data from Uganda and standard econometric techniques, we find that adverse weather events provide an opportunity for women to enter the commercial crop market by allocating land from subsistence to income generating crops. This counterintuitive pattern is, in part, explained by the greater propensity of men to allocate time to non-agricultural activities in the event of weather shocks.
17 Pages., Given the marked heterogeneous conditions in smallholder agriculture in Sub-Saharan Africa, there is a growing policy interest in site-specific extension advice and the use of digital extension tools to provide site-specific information. Empirical ex-ante studies on the design of digital extension tools and their use are rare. Using data from a choice experiment in Nigeria, we elicit and analyze the preferences of extension agents for major design features of ICT-enabled decision support tools (DSTs) aimed at site-specific nutrient management extension advice. We estimate different models, including mixed logit, latent class and attribute non-attendance models. We find that extension agents are generally willing to use such DSTs and prefer a DST with a more user-friendly interface that requires less time to generate results. We also find that preferences are heterogeneous: some extension agents care more about the effectiveness-related features of DSTs, such as information accuracy and level of detail, while others prioritise practical features, such as tool platform, language and interface ease-of-use. Recognising and accommodating such preference differences may facilitate the adoption of DSTs by extension agents and thus enhance the scope for such tools to impact the agricultural production decisions of farmers.
18 pages, Consumer preferences for food produced using currently prohibited production methods matter, especially in relation to potential trade deals. We conduct four discrete choice experiments examining UK consumer attitudes for food produced using several agricultural production methods currently prohibited in the UK, including chlorine washed chicken. Our results reveal negative preferences for these forms of agricultural production methods whereas EU food safety standards are highly valued. Willingness-to-pay estimates indicate that the positive values for food safety are frequently greater than the negative values placed on prohibited food production methods. Similarly, UK country of origin was highly valued but organic production was less valued. We discuss the implications of these results and, more generally, the use of stated preference estimates in economic modelling underpinning trade negotiations.
20 pages, One of the main drivers of food insecurity is pests, which are estimated to cause around 40% of crop losses worldwide. We examine the food security effects of plant clinics, a novel agricultural extension model that aims to reduce crop losses due to pests through the provision of demand-driven plant health diagnostic and advisory services to smallholder farmers. The study is based on survey data from maize-growing households in Rwanda, where 66 plant clinics have been established. Using switching regression and matching techniques as well as various food security metrics, including the food insecurity experience scale, we find evidence that participation in plant clinics is significantly associated with a reduction in household food insecurity. For instance, among the participating households, plant clinics contribute to a decrease in the period of food shortage by one month and a reduction in the severity of food insecurity by 22 percentage points. We also show that these effects are more pronounced for female-headed households. Overall, our findings suggest that plant clinics can play an important role in achieving the Sustainable Development Goal 2 of zero hunger.
13pgs, This article examines the effects of neighborhood on the farmer's technical efficiency (TE) level, adopting a stochastic frontier and spatial Durbin regression models. Our study exploits a three-wave household-level panel data from the Ethiopian Rural Socioeconomic Survey (ERSS) collected between 2011 and 2015. We find that farmers have an average TE score of 53%, implying a substantial potential for improvement in the production level. We further find that there is a positive and statistically significant spatial interdependence in TE levels between farms in neighboring communities. Input use, education, and other demographic characteristics are found to have significant positive direct and indirect effects. The findings suggest that policies and programs targeting productivity improvements in agriculture need to consider spatial spillover effects.
13 pages, In Ghana, groundwater, accessed through wells and boreholes, is generally unregulated and may be contaminated with pollutants including excess nitrates from agricultural chemical fertilizers. Yet, studies estimating how clean groundwater is valued are not available in Ghana. In addition, some research suggests that the pre-experiment information provided to survey respondents affects their valuation of an identical outcome. This paper estimates smallholder farmers’ preferences for groundwater protection using pre-experiment information focused on one of two outcomes: environment or health. The double-bounded contingent valuation (DBCV) approach is used to estimate willingness to pay (WTP) to protect groundwater quality. The estimation accounts for shift and anchoring effects, which are common issues with the DBCV method. The mean WTP from the health (environmental) information subsample is about US$19 (US$17) per acre, and the values are significantly different between the information conditions. The findings shed light on the importance of using precise information in eliciting WTP in a developing country setting.
22 pages, The UK exited the EU on 31 January 2020, with a transition period agreed as part of the Withdrawal Agreement. During this transition period the UK and the EU will decide on their future trading relationship. No matter what form this relationship takes, there will be disturbances to agri-food markets. This study analyses four different scenarios with increasing barriers to trade, ranging from a very close relationship similar to the European Economic Area to a distant relationship in which the UK and EU trade on Most Favoured Nation terms, using the EU focused global agricultural sector model CAPRI. In the UK, food prices will increase in all scenarios, making consumers in the UK the biggest losers. Only in a free trade agreement scenario does the UK show an unambiguous positive net welfare gain in just the agri-food sector. In the case of the European Economic Area scenario, which assumes continued access to the single market, the net welfare impact would depend on the size of the UK’s continued contribution to the EU. In the EU, declining food prices would benefit consumers but the sum of the loss in farmers’ incomes and the UK’s EU CAP contribution would be much greater than the consumer’s gain. These impacts in agricultural markets under different future trade arrangements will also be influenced by the UK’s agricultural policy changes in direct payments as well as by possible further UK trade liberalisation after the end of the transition period.
25 pages, n many countries farmers face pressure to adopt practices to promote sustainability and resilience while ensuring efficient business management to produce food and other agricultural products at reasonable cost. Given a policy context in which voluntary action is preferred over government regulation, understanding farmers’ motivation to embrace recommended practices has become a major subject for research. Increasingly, this endeavour is guided by the theory of planned behaviour, a reasoned action approach (Fishbein and Ajzen, 2010). We provide a brief overview of the theory of planned behaviour and an elaboration of good practices in the assessment of the theory’s constructs. We systematically review 124 applications of the theory to farmer behaviour on a number of specific review criteria. Based on observations of improper use, we consider theoretical and methodological issues and provide recommendations for research design and data analysis.
31pgs, This article aims at investigating the impact of financial supports from agricultural policy on farm-size dynamics. Since not all farms may behave alike, a non-stationary mixed-Markov chain modelling (M-MCM) approach is applied to capture unobserved heterogeneity in the movements of farms across economic size (ES) classes. A multinomial logit specification is used for transition probabilities and the parameters are estimated by the maximum likelihood method and the Expectation-Maximisation (EM) algorithm. An empirical application to an unbalanced panel from 2000 to 2018 shows that French farming consists of ‘almost stayers’, with a high probability of remaining in the same ES class over time, and ‘likely movers’, which present a higher probability of a change in size. The results also show that the impact of subsidies and other economic factors depends greatly on the type that a farm belongs to. These findings confirm that individual characteristics of farmers may be relevant for policy efficiency and more attention should thus be paid to unobserved farm heterogeneity in both policy design and the assessment of their impacts on farm-size dynamics.
22 pages, Many stated preference studies have shown that individuals’ attitudes play an important role in explaining their behaviour and helping to disentangle preference heterogeneity. When responses to attitudinal questions are introduced into discrete choice models, a suitable approach that corrects for potential endogeneity must be adopted. We use a discrete choice experiment to analyse the preferences of residents regarding the use of agri-environmental practices in the peri-urban area of Milan (Italy). A detailed analysis of these preferences is relevant for policymakers as farmers on the peri-urban fringe are often asked to provide environmental services to urban-dwellers. We apply a latent class model that we extend to include indicators of individuals’ attitudes towards the relationship between agriculture and the environment. Besides the application of the control function approach to deal with endogeneity, our main contribution is the use of a refutability test to check the exogeneity of the instruments in the agri-environmental setting. Our results show that attitudinal indicators help to disentangle the preference heterogeneity and that the respondents’ willingness-to-pay distribution differs according to the indicators’ values.
24 pages, We present a systematic review of the extensive body of research on farmer risk preference measurement across Europe. We capture the methodological developments over time and discuss remaining challenges and potential areas for further research. Given the constantly evolving policy environment in Europe, and increasing climate-change related risks and uncertainties, there is large value to be gained from enhancing our understanding of this fundamental aspect of farmers’ decision-making processes and consequent actions.
20 pages, To achieve social sustainability, there is a need to incorporate social metrics of farmers’ well- being into agricultural monitoring systems. We contribute to the operationalisation of the measurement of farmers’ well- being by determining how farm- level factors influence farmers’ satisfaction with their work and quality of life. Using a data sample of 1099 farms that are part of the Farm Accountancy Data Network (FADN) in nine European countries, we tested a set of hypotheses related to work satisfaction and life quality perception based on a structural equation model. Satisfaction with on- farm work has a significant and substantial influence on satisfaction with quality of life. Farm- level aspects, such as working time, age of assets, financial situation of the farm and community engagement, significantly influenced farmers’ satisfaction with farming, but their joint effect explained less than one- fifth of the satisfaction. The results suggest that agricultural information systems intended to monitor and compare sustainability progress on farms would benefit from the integration of a metric measuring social concerns from the farmers’ point of view
17 pages, Rural households in developing countries often depend on agriculture for their livelihoods. However, many also pursue off-farm economic activities either to complement their farm income or because they lack access to agricultural land. Rural off-farm employment is often informal and temporary. Searching for jobs can be associated with high transaction costs, which may be a constraint on some households’ participation in off-farm employment. The increasing spread of mobile phones may help to reduce these transaction costs. Here, we test the hypothesis that mobile phone ownership increases rural households’ participation in off-farm employment and—through this mechanism—also improves household income. We use nationally representative panel data from rural India and regression models with household fixed effects to control for confounding factors and unobserved heterogeneity. We find that mobile phone ownership is positively associated with the likelihood of participating in various types of off-farm employment, including casual wage labour, salaried employment and non-agricultural self-employment. This association is larger in female-headed than in male-headed households. The estimates also show that mobile phone ownership is positively associated with household income, partly channeled through the off-farm employment mechanism.
24pgs, Increasingly, the health claims made by food products focus on the marketing of specific molecular enrichments. Research exploring consumers’ willingness to pay (WTP) for health claims assumes that individuals hold perfect information on the benefits of the enrichment, and that their valuations depend solely on whether or not they need to improve their health. While health interventions are aimed at individuals at higher health risk, consumers may be unaware of the health risks that they face, limiting the effectiveness of a generic targeting strategy. Using an orthogonal experimental design, we explore the impact of two factors on the WTP for vitamin D enrichment in eggs: whether the information is person-specific or generic; and the presence of a health claim explaining the vitamin D enrichment. Results indicate that it is the provision of information, not the health claim, that influences WTP. Both generic and personalised information lead to similar increases in the WTP for vitamin D enrichment. While we only observe a direct effect of generic information on the WTP for vitamin D enrichment, personal information may also operate by increasing the perceived risk of vitamin D deficiency. Our results support the use of personalised health information during the choice task as a means of increasing the sales of healthy products.
15pgs, Research has suggested to not solely include cognitive processes but also affective processes in economic choice modeling. Studying Medjool dates, we conducted a laboratory experiment combining choice experiments and eye-tracking to account for cognitive processes. In addition, participants indicated their level of worry related to production practices to account for affective processes. Our results show that consumers worry more about pesticide residues than genetic modification in foods. They also pay more attention to labels related to these production practices compared to other labels; and the production practice labels received the highest willingness to pay (WTP). Results from linear regressions show that both cognitive and affective processes are associated with WTP. Especially in the full model for WTP for pesticide-free labeling an increase of attention by 1 s increases WTP on average by $0.10 and an increase of the level of worry from one category to the next increases WTP on average by $0.17. Overall, results show that including both cognitive and affective processes as explanatory variables is important when determining factors associated with WTP.
11pgs, Are farmers better stewards of the land they own than the land they rent from others? We answer this question using a data set that identifies Ontario farmers’ conservation practices on their own land as well as the land they rent. Using a fixed-effects regression approach, we find that the role of tenure varies for different types of conservation practices. Farmers were found to be just as likely to adopt a machinery-related practice such as conservation tillage on their rented land as that land which they own. On the other hand, farmers were found to be less likely to adopt site-specific conservation practices such as planting cover crops on rented land. However, this effect diminishes as the expected length of the rental relationship increases when the landlord has a farming background.
20 pgs, Off-farm employment opportunities are thought to have an effect on farm exit rates, though evidence on the sign of this effect has been mixed. Examining this issue in the context of Japanese agriculture, we find that farm exits are related to off-farm income as a share of household income, and more specifically to the nature of off-farm work. Two econometric models are developed: a hierarchical Bayesian linear model and a hierarchical Bayesian Poisson model. Both models perform well in predicting exit rates across the towns and prefectures of Japan.
22 pages, Smallholder farmers in developing countries encounter multiple barriers in access to inputs and technology, which prevent them from reaping the benefits from market participation. Women farmers face additional constraints due to gender norms that further limit their engagement in productive activities. While collective action has been shown to improve access to markets and economic outcomes for farmers overall, the evidence on the effects of cooperative membership for women smallholders remains limited. We investigate empirically the economic benefits of collective action for women farmers in the honey sector in Ethiopia. Relying on a rich data set on women honey producers, both cooperative members and non-members, we evaluate the effects of belonging to a cooperative on three outcome variables through coarsened exact matching and regression analysis. Our results indicate that cooperative membership significantly increases the market price and the production quantity and, while the average effect on the share of product marketed is statistically insignificant, significant differences emerge for women with given characteristics. These results are shown to be robust to a number of tests that address biases from selection on observables and unobservables. An analysis of the heterogeneous effects of household membership in multiple groups finds that membership of self-help groups or farmer associations amplifies the positive outcomes from belonging to a formal cooperative. Finally, qualitative findings derived from the same communities indicate self-reported improvements in agency and self-esteem among women members, thus reinforcing the importance of the quantitative findings.
21 pages, In this study we explain the concepts, determinants and imperatives of boundary in smallholder producers’ cooperatives both conceptually and empirically. The conceptual framework indicates the importance of the type of goods (being a club good or not) and range of activities that a cooperative provides to its members in defining a competitive boundary. Using unique organisational and market level data from Ethiopia, we then test empirically whether the observed (weak) performance of producers’ cooperatives in Africa is explained by their organisational boundary – the type and range of goods or services they provide to members. The empirical results confirm that the competitiveness of producers’ cooperatives is significantly correlated with the type and number of services – i.e. cooperatives that provide club goods and a limited range of services are found to be more competitive. The results also suggest that a considerable number of cooperatives in Ethiopia engage in markets where they do not have competitive advantage. Overall, we demonstrate the importance of properly defining a viable boundary – proper selection of services (or markets) and limiting the range of services – for improving the competitiveness of membership-based producer cooperatives in Africa.
15 pages, This paper studies Chinese grape growers’ time discounting and its implications for the adoption of technology that can reduce the negative effects of increasing precipitation. Using primary data collected in Xinjiang Province, we undertook a contingent valuation of rain covers that protect fruit from rain and estimated a discounted utility model using these data. Using a hierarchical Bayesian approach, we find that local grape growers discount the future very heavily, with a discount rate of 0.17 per year, which is almost four times higher than the Chinese market interest rate. Farmers also tend to underestimate the benefits of adopting covers, with their purchase decisions appearing to largely depend on their past actual losses rather than future anticipated losses. These findings have broader implications for policies promoting proactive adaptation in response to likely increased rainfall in the region. Targeting farmers who give lower weight to events far off in the future and understanding that many farmers may tend only to make adoption decisions that have strong short-term benefits could improve the efficacy of climate policies that target agricultural technologies.
25pgs, We combine farm accounting data with high-resolution meteorological data, and climate scenarios to estimate climate change impacts and adaptation potentials at the farm level. To do so, we adapt the seminal model of Moore and Lobell (2014) who applied panel data econometrics to data aggregated from the farm to the regional (subnational) level. We discuss and empirically investigate the advantages and challenges of applying such models to farm-level data, including issues of endogeneity of explanatory variables, heterogeneity of farm responses to weather shocks, measurement errors in meteorological variables, and aggregation bias. Empirical investigations into these issues reveal that endogeneity due to measurement errors in temperature and precipitation variables, as well as heterogeneous responses of farms toward climate change may be problematic. Moreover, depending on how data are aggregated, results differ substantially compared to farm-level analysis. Based on data from Austria and two climate scenarios (Effective Measures and High Emission) for 2040, we estimate that the profits of farms will decline, on average, by 4.4% (Effective Measures) and 10% (High Emission). Adaptation options help to considerably ameliorate the adverse situation under both scenarios. Our results reinforce the need for mitigation and adaptation to climate change.
