Abstract
Production risks are unavoidable in paddy production due to unprecedented climate changes in many developing countries. This study intends to identify the production risks and farmers’ decisions to adapt the climate change in paddy production. A survey was conducted, gathering cross-sectional data from 1410 farmers cultivating paddy in rural Sri Lanka. This research analyses farmers' adaptation decisions against climate change using climate-smart practices, socio-economic parameters, and household characteristics. It estimates the impact of experiencing drought and flood among adapting and non-adapting farming communities. The study uses an endogenous switching regression model to avoid endogeneity and selection bias: the study measures productivity, volatility, downside risk exposure and kurtosis between the adapters and non-adaptors. The results revealed that adaptors are sensitive to drought and flood, influencing the four production outcomes. However, the adaptors significantly reduced their volatility and risk exposure, while the non-adapters were susceptible to environmental stress experiences. Adaptation is highly influenced by climate-related variables and socio-economic and credit-related variables in the empirical analysis. The role of the extension services, access to credit, total credit, and income are prominent in the adaptation of paddy production.
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