The effects of climate change adaptation strategies on the welfare of rural farm households in Ethiopia

Abstract

AbstractWe estimate the effect of multiple climate change adaptation strategies (CCAS) on farm household welfare using a new three‐wave panel data derived from the World Bank's geo‐referenced household socioeconomic survey and the National Aeronautics and Space Administration's (NASA) historical weather data. Using the multinomial panel endogenous switching regression model, we discovered that combining climate change adaptation strategies such as crop rotation and improved seed varieties is the most effective way to improve the welfare of smallholder farmers. The average treatment effect (ATT) results show that all CCAS have a positive and significant effect on the pattern of welfare improvement among smallholder farmers, but combinations of CCAS provide the highest payoffs. As a result, the combination of crop rotation and improved seed is the most appealing CCAS package that farmers could adopt as an ex‐ante strategy to improve farm household welfare. We also discovered that climate change and technology adoption are the most important factors influencing the welfare of rural farm households. Furthermore, we discover that the effectiveness of climate change adaptation strategies varies by farm households. Thus, we argued that targeted extension and advisory services, as well as other policies that support the synchronization of adaptation strategies, are critical for improving the welfare of rural farm households.