Switching Regression Research Articles

Does access to credit matter in land transfer decision-making? Evidence from China

Land transfer is a favorable tool to solve the low land utilization rate caused by population aging and migration. Most previous studies on land transfer behavior focused on the participation and area of transfer, while little attention was paid to farmers’ future land transfer intentions. Hence, by building an analysis framework of land transfer-in “participation-area-future willingness,” this study uses the recent farm-level data from China to systematically examine the relationship between access to credit and land transfer-in decisions. To address the potential endogeneity and selection bias from the observable and unobservable factors, we employ the endogenous switching regression (ESR) model and endogenous switching probit (ESP) model for the analysis. The empirical results show that access to credit increases the expected probability of land transfer-in participation and futural intention, as well as helps to expand the land transfer-in area. Specifically, access to credit contributes to increasing the participation, area, and futural willingness of farmers’ land transfer-in by 62.6%, 126%, and 74.9%, respectively. The positive role of access to credit is confirmed by the estimates of the propensity score matching (PSM) approach. Our findings highlight that financial support through access to credit can encourage farmers’ land transfer-in decisions and further protect the limited arable land source.

Effect of Climate Smart Agriculture Innovations on Climate Resilience among Smallholder Farmers: Empirical Evidence from the Choke Mountain Watershed of the Blue Nile Highlands of Ethiopia

Smallholder farmers’ capacities need to be strengthened to enable them to better withstand the upcoming impacts of climate change; these capacities not only include the responsive capacity, but also consider innovation, learning, and anticipation to be prepared for the projected impacts of a changing climate on the agriculture system. The objective of this paper is to examine the impact of climate smart agriculture (CSA) innovations on building climate resilience capacity in smallholder agriculture systems. A cross-sectional household survey was conducted among a multi-stage sample of 424 smallholder farmers selected from five agroecosystems of the Upper Blue Nile Highlands in Ethiopia. The study used an endogenous switching regression (ESR) model to examine the impact of CSA innovations on building climate resilience capacity among smallholder farmers. The true average adoption effects of climate resilience capacity under actual and counterfactual conditions showed that different CSA innovations have different effects on the climate resilience capacity of households. Except for SWC adopters, all CSA innovations significantly increased the climate resilience capacity of households. However, improved variety, crop residue management, and SWC have more profound effects on the non-adopters than adopters, =if non-adopters had adopted these CSA innovations. Strong absorptive, adaptive, and transformative capacities through strong disaster and early warning systems, climate-resilient infrastructure, a strong public agricultural extension system, a strong informal safety net, and social networks build a climate-resilient agriculture system among smallholder farmers. Thus, scaling up of CSA innovations may expand the benefit of CSA innovation on building the climate resilience capacities of households. Thus, strong risk management, disaster mitigation and early warning systems, adaptive strategies, information and training, informal safety nets, social networks, and infrastructure use may build the climate resilience capacity of smallholder farmers by facilitating the adoption of CSA innovation. Therefore, policies that strengthen good governance, social cohesion, disaster communication and early warning systems, input supply of drought-resistant varieties, climate smart extension service, and climate-resilient infrastructure are necessary.

Assessing Financial Literacy and Farmland Abandonment Relationship in Ghana

Farmland abandonment has been a major concern for policymakers in most developing nations since it is associated with food security and poverty alleviation. In view of this, assessing its potential determinants is essential and timely. This study examines the relationship between financial literacy and farmland abandonment in Ghana using survey data (N = 572). The study employs endogenous switching regression (ESR) for its estimation. Our findings show that financial literacy is low among rural dwellers. Also, the findings depict that financial literacy is positively related to farmland abandonment reduction. Moreover, different household groups depict a heterogeneous relationship between financial literacy and farmland abandonment. Thus, the association between financial literacy and farmland abandonment reduction is more pronounced for low-income farm households and female farmers. We recommended that financial literacy programs can be organized or shown on national radios and television to provide financial education to the country’s residents. Our findings could offer some implications for stimulating agricultural intensification while ensuring rural advancements.

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

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.

Does weather index-based insurance adoption influence Cocoa Output? An endogenous swicth regression approach

ABSTRACT Agriculture is the most weather-dependent and risky sector where it is unpredictable when a season will be profitable during harvest. Droughts and floods may increase the risk of weather-related catastrophes in agriculture. Weather index Insurance has been widely recommended for decades to control weather risk. 600 Ashanti cocoa producers were surveyed to see how weather index insurance adoption affects cocoa output in Ghana. The endogenous switching regression (ESR) technique coupled with probit models were employed in this study. Cocoa bean production was 30.8 percent whiles only 15.8% of cocoa farmers knew about weather index insurance. The average annual farm income, off-farm, and remittances were 7.40, 7.26, and 6.61, respectively. Weather index insurance adoption and cocoa output were positively influenced by cocoa farm age, gender, education, awareness, and access to finance. We found that weather index insurance negatively influences cocoa output in Ghana due to inadequate information on insurance among farmers, lack of education, lack of awareness, and access to credit. Our findings will help Ghana Agricultural Insurance Pool and the government improve accessibility, affordability, and awareness for cocoa growers in the region and beyond. The findings will add to weather index insurance literature and improve agriculture risk.

Impact of Moonlighting on the Earning Differentials in Sri Lanka

Holding more than one job is called moonlighting. This creates both positive and negative impacts on individual workers as well as on the economy. This paper limits itself only to the impacts on the individual worker. This study examines the impacts of moonlighting on workers’ per-hour total earnings and wage differentials. The Sri Lanka Labour Force Survey conducted by the Department of Census and Statistics of Sri Lanka in 2017 has been used for the study. The study uses 28,671 employed persons, and 2,351 are holding secondary employment. The Endogenous switching regression model has been used for the analysis. The Endogenous switching regression allows the comparison of the factors associated with total log-hourly earnings between moonlighters and non-moonlighters with and without moonlighting. Moonlighters are generally a disadvantaged group when compared with non-moonlighters. However, moonlighting facilitates the reduction of the wage gap between moonlighters and non-moonlighters. Moonlighting by moonlighters and moonlighting by non-moonlighters are economically optimal solutions for both groups. Therefore, it is evident that moonlighting has increased economic welfare. Further, it reduces wage disparities among workers in terms of ethnic groups and gender and thus leading to increased gender and ethnic welfare, while it causes to expand earning disparities by residential sectors leading to reduce their economic welfare. Creating formal opportunities for moonlighting, encouraging moonlighting among females, minor ethnic groups etc. Through micro-financing programmes would be important policy options for empowering vulnerable groups in the labour market of Sri Lanka, according to the findings of this study.

Heterogeneous impacts of home-gardening on household food and nutrition security in Rwanda

This study examines farmers’ decisions to engage in subsistence home-gardening and its impact on food and nutrition security among farm households in Rwanda under diverse conditions. The study uses a nationally representative dataset from Rwanda from 2012, 2015, and 2018. We employ an endogenous switching regression model to jointly estimate the drivers of home-gardening participation decisions and food and nutrition security outcomes, whiles accounting for selection bias from observable and unobservable factors. We also estimate the treatment effects of home-gardening participation on dietary diversity, food consumption score, and anthropometric markers of women and children. The treatment effects are calculated at sample means and connected to market-related variables, such as land ownership, commercialization extent, and market distance. We find that having a home-garden is linked to improved dietary diversity and better nutritional outcomes. If households have restricted access to land and reside further away from marketplaces, the benefits are larger. In contrast, the benefits of home-gardening are positive and significant regardless of the level of commercialization of production. We also discover that family size, gender, education, access to land, and livestock ownership are statistically significant drivers of home-gardening participation in Rwanda. However, the amount of commercialization did not affect a household’s decision to participate in home-gardening.

Development outcomes of land tenure formalization under customary and statutory land tenure systems in Tanzania: a multinomial endogenous switching regression approach

BackgroundLand Tenure Formalization (LTF) is long advocated as a policy prescription that fosters growth and reduces poverty in developing countries. However, the empirical evidence on LTF effects is mixed and inconclusive, proving unclear implications for policy. A set of possible conceptual and methodological flaws arising from treating LTF as a dichotomy between formalized and non-formalized alongside potential selectivity biases are amongst the main explanations for the mixed and inconclusive results. Using Tanzania’s National Panel Survey data from the 2014/2015 wave and employing a Selectivity Corrected Multinomial Endogenous Switching Regression, this study models the development outcomes of LTF with clear distinction of LTF between customary and statutory land tenure systems in Tanzania.FindingsThe study finds that possession of formal land tenure certificates [Certificate of Customary Right of Occupancy (CCRO) or Certificate of Granted Right of Occupancy (CGRO)] improves perceived land tenure security, but the effect is relatively larger and more significant for CGRO holders than CCRO holders especially in economically high potential areas, where land is becoming more individualized and commoditized. With regard to credit access, our results show variations in the effects between general, formal, and informal credit access. While there is no significant effect of LTF on general access to credit, possessing a CGRO significantly reduces the uptake of informal credit and appears to improve access to formal credit. With regard to land investments, our results show positive and significant effects of LTF on organic and inorganic fertilizer use as well as trees and permanent crops investments, but only for CGRO plots.ConclusionsThe study concludes that the effects of LTF differ significantly between the land tenure systems, thus, treating LTF as a dichotomy between formalized and non-formalized is an oversimplification that could potentially mislead policy decisions. Therefore, the study recommends that the design, implementation and evaluation of LTF programs should recognize this distinction for greater clarity about LFT effects and more meaningful policy messages. The study, further, recommends strategic land policy interventions that aim to enhance land tenure security, especially in high potential areas for more socio-economically optimal outcomes of the interventions.

Do market outlet combinations improve smallholder gross margin for smallholder French beans producers?

ABSTRACT Procurement of fresh produce necessitates a consistent, high-quality, supply. This study examined effects of a single, and combined, market strategy on gross margin of smallholder French bean[s] (Phaselous vulgaris L.) farmers. A random sample of 215 farmers was used and a multinomial endogenous switching regression model analyzed the data. The choice of a market outlet combination was influenced by gender of the household decision-maker, household size, education, off-farm income, group membership, extension service, farming experience, off-farm income, credit access, and market reliability. Participating in multiple market outlets increased gross margin per season. Smallholder farmers reported USD 225.66 per season when selling in all vertical coordination options. Growers were worse off by participating in the contract option only, with reduced gross margin. Adoption of all market outlets was positively influenced by education and off-farm income. Smallholder French bean farmer’s socio-economic circumstances matter in shaping the choice of market outlet combinations, while market diversification is important for smallholder producers.

To own or not to own? Land tenure security and production risk in small-scale farming

While the impact of land tenure security on farm yield has been extensively investigated in the literature, little is known about the role tenure security plays in mitigating risk exposure. Using a nationally representative dataset collected through a multistage stratified random sampling of 1820 maize farmers in Nigeria during the 2014/2015 production season, we fill this knowledge gap by analysing the treatment effect of land ownership on production risk, measured by expected yield, yield variability (variance), and downside risk (skewness). To do so, we employ an endogenous switching regression model to sufficiently tackle selectivity bias that may arise from observed and unobserved factors. Our findings reveal that land ownership raises maize yield by 1.6% and reduces variability and downside risk by 95% and 164%, respectively. The robustness of these findings is established by further analyses using propensity score matching and inverse-probability-weighted regression adjustment approaches. Moreover, we find that the impacts of land ownership differ across landowners with different farmer characteristics and farm-level factors. Our results suggest that promoting policies that seek to encourage secure land tenure arrangements can be effective in mitigating production risk and crop failure, particularly in small-scale farming.

Unveil the veil of limited liability: Evidence from firm investment

AbstractWe investigate the effect of limited liability on firm investment. We find firms that intend to borrow but have higher risk have a greater probability of changing to limited liability. With propensity score matching, difference‐in‐differences analysis, and switching regressions with an endogenous switching model, we find that, after the liability regime change, firm investment aggressiveness decreases but on a lesser level than the over‐time change for firms using unlimited liability. We also find there is improvement in investment efficiency and return on invested capital. These results suggest that limited liability encourages firm investment and leads to more effective investment policies.

Does Row Planting Enhance Farm Productivity and Reduce Risk Exposure? Insights From Ethiopia

AbstractThis study examines the impact of the row planting method on maize productivity and risk exposure using panel datasets from Ethiopia. A flexible moment-based production function is fitted to capture the expected yield, yield variance, and exposure to downside risk. A Mundlak–Chamberlain approach is combined with a switching regression treatment effects model to account for unobserved heterogeneity and endogeneity. The study shows that adopters of the row planting method significantly reduced exposure to downside risk while increasing expected yield. The analysis also identified some household and environmental conditions that affect the gain from the row planting method.

Impact of rural out-migration on poverty of households in southern Ethiopia

This study examined the impact of rural out-migration on the poverty of migrant-sending households by applying the new economics labor migration theory as a theoretical framework, and the multinomial endogenous switching regression as an analytical model in southern Ethiopia. Data were gathered from 415 sample rural households using stratified random sampling in the year 2021. The cost of basic needs approach and the Foster, Greer, and Thorbecke (FGT) method were used to establish the poverty line and create the poverty indices, respectively. The average annual food and non-food poverty lines are Birr 8997.52 and 2249.38 per adult equivalent. The incidence, depth, and severity of general poverty are 39.76, 10.11, and 3.55%, respectively, while the incidence, depth, and severity of food poverty are 34.70, 9.47, and 3.58%, respectively. When compared to other households, households with international migrants have a lower incidence, depth, and severity of poverty. The regression result of the multinomial endogenous switching model showed that international migration increases consumption per adult equivalent of households by 29.8% and is significant at the 1% level. Participation in rural-urban and international migration increases kilocalories per adult equivalent per day by 7.4 and 36.4%, respectively, in migrant-sending rural households. The findings support the new economics labor migration theory’s remittance hypothesis. Promoting access to land, capital, farm and non-farm employment, irrigation, family planning, and basic public services would improve rural household welfare and reduce the current wave of rural out-migration in Southern Ethiopia.

Maize Productivity and Household Welfare Impacts of Mobile Money Usage in Tanzania

This study examined the determinants and impacts of mobile money (MM) usage on maize productivity and poverty likelihood (i.e., the probability of a household falling below the international poverty line at USD 1.9 per capita per day) in the Mbeya Region, Tanzania. The analysis was conducted using the endogenous switching regression (ESR) model on data from a random sample of 1310 households selected from seven districts in the region. Results of the ESR estimation show that MM usage is strongly and positively associated with the education level of the household head, asset ownership, credit access, input access, and social networks. MM usage is also significantly associated with increased maize productivity and a reduced poverty likelihood. Farmers who chose to use MM services increased their maize productivity by about 124 kg/acre and reduced their poverty likelihood by nearly 25 percentage points, as measured by the progress out of poverty index. These findings call for a targeted approach to reaching and supporting MM usage among households with constrained access to formal financial services to increase maize productivity and reduce poverty likelihood.

Gender analysis of access to formal credit and rice productivity: evidence from Togo

ABSTRACT The objective of this paper is to analyze the impact of access to formal credit on rice productivity by capturing gender differences. To that end, an endogenous switching regression model and the Oaxaca and Blinder decomposition are estimated. The paper makes use of the intra-agricultural household data from the 2018 Harmonized Survey on Household Living Conditions of Togo, with 12,478 rice plots. The results reveal that the average rice productivity of male plot managers is about 53.0% higher than that of women. The State would gain by developing policies of membership in a peasant organization and inclusive education for females.

Economic benefits of internet use for smallholder wheat farmers

ABSTRACT This study analyses the economic benefits of Internet use, focusing on farm profit, risk exposure (skewness), and cost of risk. We use the flexible moment-based production function to derive the risk exposure indicator and the endogenous switching regression model to account for the self-selection bias. A quantile-based approach is also employed to estimate the influence of Internet use on the cost of risk. Analysing the household-level data surveyed from 558 wheat farmers in China, we find that Internet use significantly increases farm profit by 8% and reduces risk exposure by 102%. The profit-increasing effect of Internet use is achieved mainly because Internet use increases gross revenue and wheat yields but reduces production costs. Internet use also decreases the cost of risk associated with wheat production. Our findings highlight that Internet use could be an anti-risk strategy for smallholder farmers to boost farm performance and mitigate production risk and crop failure.

Impact of livelihood strategies and capitals on rangeland sustainability and nomads' poverty: A counterfactual analysis in Southwest Iran

Traditional ranching farming provides society with meat, agricultural products, leather, and hides in an economic procedure through livestock grazing on rangelands. Based on recent research, traditional ranching farming has a crucial role and a significant contribution to the employment of nomadic households. According to recent rangeland degradation, it is important to pay attention to the nomadic livelihoods based on the rangeland environment and the household economy. Global implications for the study of pastoral livelihoods are based on maintaining rangelands and improving household welfare (in terms of earnings). For this purpose, a sustainable livelihood framework based on livelihood strategies and natural and unnatural capitals was applied. The sample size of 393 households from 24 nomadic residences was selected based on the multi-stage cluster sampling method. Data were collected in the form of face-to-face interviews with sample nomads in 2018. The results of switching regression models for analyzing the counterfactual effect indicated that nomadic households who adopted servicing, agriculture, and diversification strategies caused the improvement of rangeland sustainability at 3%, 7%, and 4% and the reduction of household poverty at 4%, 7%, and 5%, respectively. In this regard, increasing human capital and financial capital have significant effects on rejecting ranching strategies and selecting agriculture and diversification strategies.

Reducing susceptibility to drought under growing conditions as set by farmers: The impact of new generation drought tolerant maize varieties in Uganda

Given the challenges brought about by the increasing frequency of climatic stressors (droughts) and other biotic challenges (pests and diseases), breeding for tolerance to these traits is now seen as an indispensable adjunct to the enhancement of yield potential. Drought tolerant (DT) maize varieties that do well under moderate drought and outperform (or do not underperform) commercial checks under normal rainfall are becoming available. This study examines the role of these maize varieties in mitigating the effects of drought on maize yields in drought-prone areas of eastern Uganda. We estimate the causal impact of these new generations of maize varieties using a multinomial endogenous switching regression treatment effect framework. The average treatment effects of adopting DT maize show that farmers who actually cultivated DT maize achieve 30% more yield than what they would have obtained with non-DT hybrids. Similarly, average treatment effects on the untreated, revealed that farmers who grew non-DT modern and local maize would have 32 and 54% more yield, respectively, if they instead had adopted DT maize. While being superior to all other maize seeds, the magnitudes of the benefits of DT maize varieties were more pronounced in areas with comparatively less rainfall amount providing strong evidence that the yield potential of these varieties is stable across space and a wide range of rainfall conditions. If the genetic gains of these varieties can be secured over the long term, their impacts in improving the resilience of maize farming systems are likely to be considerably large and favorable.

Impacts of microcredit access on climate change adaptation strategies adoption and rice yield in Kwara State, Nigeria

Access to microcredit has received a lot of attention, but, its role in the adoption of climate change adaptation strategies and improvement of rice yield is not often debated. This study investigated the impacts of access to microcredit on the adoption of climate change adaptation strategies and the yield of rice farmers. A multistage sampling procedure was employed to select 320 rice farmers for the study. Data collected were analyzed using descriptive statistics, the Multivariate Probit regression model, the Poisson regression model with endogenous treatment, and the Endogenous Switching Regression Model. The descriptive results for the entire sample show mean values of 45 years for age, 9 people for household size, 20 years for farming experience, and 19 hectares for farm size. The result also showed that many of the rice farmers are male (94%), married (92%), educated (97%), and belong to rice farmer's associations (85%). Most of the rice farmers have access to microcredit (80%) and the farmers depend largely on their funds from other enterprises (100%). Many of the farmers mostly adopted high-quality-improved seeds (92%). Further findings reveal that age, educational status, household size, farm size, and years of farming experience are factors that largely determine the choice of climate change adaptation strategies adopted. The study also revealed that access to microcredit significantly affected the intensity of adoption of climate change adaptation strategies; and farmers’ age, education, and farm size significantly affected rice yield. Hence, policies that can promote increased access to microcredit should be promoted.

Does Internet Use Boost the Sustainable Subjective Well-Being of Rural Residents? Evidence from Rural China

The rapid development of the internet is affecting rural residents’ well-being profoundly in China. To empirically investigate the impacts of internet use on farmers’ subjective well-being, the latest version of the China Family Panel Studies data is utilized and multiple regression methods are employed. The results of the ordered logit model indicate that internet use positively affects farmers’ subjective well-being. Propensity score matching and endogenous switching regression are used to eliminate possible endogeneity and still reveal robust results. The frequencies of online study, online social interaction, and online entertainment are important channels influencing farmers’ subjective well-being. Furthermore, the impacts of internet use are heterogeneous. Internet users from the central and western regions have higher levels of subjective well-being than their counterparts from the eastern region. Young and middle-aged internet users are happier than the elderly ones. Therefore, the government ought to fully cover rural areas with the internet, eliminate the digital division, especially in Central and Western China, and pay more attention to internet use by the elderly.