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The Effect of Risk, Ambiguity and Coordination on Farmers’ Adaptation to Climate Change: A Framed Field Experiment

27 Pages Posted: 23 Jul 2010 Last revised: 28 Mar 2015

Francisco Alpizar

Tropical Agricultural and Higher Education Center

Fredrik Carlsson

Goeteborg University - School of Economics & Commercial Law

Maria Naranjo

Tropical Agricultural and Higher Education Center

Date Written: July 22, 2010

Abstract

The risk of losses of income and productive means due to adverse weather associated to climate change can significantly differ between farmers sharing a productive landscape. It is important to learn more about how farmers react to different levels of risk, under measurable and unmeasurable uncertainty. Moreover, the costs associated to investments in reduced vulnerability to climatic events are likely to exhibit economies of scope. We explore these issues using a framed field experiment that captures realistically the main characteristics of production, and the likely weather related losses of premium coffee farmers in Tarrazu, Costa Rica. Given that the region recently was severely hit by an extreme, albeit very infrequent, climatic event, we expected to observe, and found high levels of risk aversion, but we do observe farmers making trade-offs under different risk levels. Although hard to disentangle at first sight given the high level of risk aversion, we find that farmers opt more frequently for safe options in a setting characterized by unknown risk. Finally, we find that farmers to a large extent are able to coordinate their decisions in order to achieve a lower cost of adaptation, and that communication among farmers strongly facilitates coordination.

Keywords: Risk Aversion, Ambiguity Aversion, Technology Adoption, Climate change, Field Experiment

JEL Classification: C93, D81, H41, Q16, Q54

Suggested Citation

Alpizar, Francisco and Carlsson, Fredrik and Naranjo, Maria, The Effect of Risk, Ambiguity and Coordination on Farmers’ Adaptation to Climate Change: A Framed Field Experiment (July 22, 2010). FEEM Working Paper No. 81.2010; CMCC Research Paper No. 90. Available at SSRN: https://ssrn.com/abstract=1646882 or http://dx.doi.org/10.2139/ssrn.1646882

Francisco Alpizar

Tropical Agricultural and Higher Education Center ( email )

Turrialba
Costa Rica

Fredrik Carlsson (Contact Author)

Goeteborg University - School of Economics & Commercial Law ( email )

Box 640
SE 405 30 Goeteborg
Sweden
+46 31-773 4174 (Phone)
+46 31-773 1043 (Fax)

Maria Naranjo

Tropical Agricultural and Higher Education Center ( email )

Turrialba
Costa Rica

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