Climate Shocks and Farmers’ Agricultural Productive Investment: Resisting Risk or Escaping Production?

Abstract

Climate shocks can increase uncertainty in agricultural production. Using data from the China Family Panel Studies (CFPS), this study examines the impact of climate shocks on farmers’ productive investment and its mechanism of village public productive investment. The study found the following: (1) The impact of climate shocks have a significant impact on farmers’ productive investment choices. Farmers who are greatly impacted by climate shocks have a significantly lower probability of increasing their total productive investment. (2) In terms of investment content, climate shocks will reduce farmers’ investment in machinery (invest1) and investment in the cost of seeds, fertilizers and pesticides (invest3) and increase investment in agricultural productive services (invest2). (3) However, there is heterogeneity in the village climate characteristics and farmers’ risk preferences in this result. (4) From the perspective of the transmission mechanism, village public production investment has a moderating effect between climate shocks and farmer agricultural production investment. For total investment and invest3, village public production investment will weaken the main effect of climate shock, significantly reduce the impact of climate shock, and alleviate the inhibitory effect of climate shocks on farmers’ investment. Agricultural productive services (invest2) will strengthen the main effect of climate shocks and promote farmer households’ agricultural productive service investment. The article finally concludes and discusses some policy implications.

The effects of climate extreme events on selected food crop yields in Sub-Saharan Africa

“…Concerning indirect impact, our outcomes revealed that agricultural labour force, fertilizer consumption and financial development are the transmission channels through which floods and droughts reduce maize, rice and sorghum yields, respectively. Our outcome is consistent with [ 25 ] who think that climate-related disruptions have affected farmers’ investment choices, resulting in decreased expenditures on machinery, seeds, and pesticides and [ 26 ] who estimate that fluctuations in weather conditions influence agricultural assets such as land, livestock, and farming equipment. Indeed, while floods or droughts occur, this made agricultural activities difficult for farmers and to survive, they are forced to leave their villages for the cities to engage in non-agricultural activities, this leads to yields reduction.…”

“…Indeed, climate extreme events can lead (i) to soil leaching, this in turn can reduce soil fertility and productivity, (ii) farm labour migration in another areas to do off farm activities, this reduces farm labour and in turn lessens food productivity and finally, (iii) increase farmer household credit constraints because financial institutions will provide less loan to farmers which experienced floods or droughts events; this can be an obstacle for farmers' to access capital to produce food. Similarly, climate-related disruptions (i) have affected farmers’ investment choices, resulting in decreased expenditures on machinery, seeds, and pesticides [ 25 ] and, (ii) influence agricultural assets such as land, livestock, and farming equipment [ 26 ].…”

“…Based on the argument of [ 1 ] who stated that disasters' influence on agricultural growth is not limited to a single season, we investigated on the effect of past extreme climatic events effect on current agricultural production. Similarly, based on [ 25 ] who concluded that climate-related disturbances have impacted farmers’ decisions regarding investments, leading to reduced spending on machinery, seeds, and pesticides and [ 26 ] who said that variations in weather patterns affect agricultural resources such as land, livestock, and farming tools, we explore the transmission channels through which floods and droughts affected agricultural yields.…”

“…Indirectly, extreme climatic events affect non climatic factors such as capital (land and machinery), farm labour, fertilizers and financial development leading to soil infertility, agricultural labour force migration and credit constraints which in turn reduce agricultural production. For example, climate-related disturbances have impacted farmers' decisions regarding investments, leading to reduced spending on machinery, seeds, and pesticides [ 25 ]. Similarly, variations in weather patterns affect agricultural resources such as land, livestock, and farming tools [ 26 ].…”

Climate Shocks, Household Resource Allocation, and Vulnerability to Poverty

“…Column (3) of Table 6 shows that the coefficient of CS is negative and significant at the 0.01 level, indicating that climate shocks reduce the productive investment of farm households [38]. The coefficient of productive investment in column ( 4) is positive and significant at the 0.01 level, indicating that an increase in farmers' productive investment increases their poverty vulnerability.…”