Abstract
Farmers have number of options available in managing disaster risks at farm and many of them utilize these risk management tools simultaneously. However, previous studies have ignored the correlation among the risk management adoption decisions. This study, therefore, aimed at investigating factors affecting the adoption of off-farm diversification and agricultural credit to manage catastrophic risks while taking into account the contemporaneous correlation in the decisions to adopt the two risk management tools simultaneously. Bivariate and multinomial probit approaches are applied to data collected from four districts of Khyber Pakhtunkhwa Province in Pakistan. Findings revealed a strong correlation between the decisions to adopt the two risk management tools and conclude that adopting one risk management tool may induce farmers to adopt the other tool at the same time. Moreover, socioeconomic characteristics, losses due to natural disasters, farmers’ risk perceptions and their risk attitude play significant role in shaping their decisions of adopting risk management tools.
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