Meet Economists Doing Economics- Shaikh Eskander — Applied Environmental Microeconomist
Interviewed at the 2018 AEA poster session, Shaikh Eskander, an economist from Bangladesh has an interesting job market paper on how farmers were able to lower their losses from exposure to disasters through participation in land rental market, thereby indicating how farmers leverage their resources in climate change adaptation.
We examine the effects of natural disaster exposure on agricultural households who simultaneously make rent-in and rent-out decisions in the land rental market. Our econometric approach accounts for the effects of disaster exposure both on extensive margin, i.e. adjustments in the quantity of operated land, and intensive margin, i.e. agricultural yield conditional on the land quantity adjustment, based on selectivity-corrected samples of rental market participants. Employing a household survey dataset from Bangladesh, we find that farmers were able to lower their losses from exposure to disasters by optimizing their operational farm size through participation in the land rental market. These results are robust to alternative specifications. This suggests that the land rental market may be an effective instrument reducing disaster risk, and post-disaster policies should take into account this role more systematically.
From the conclusion:
As this paper suggests that access to a well-functioning land rental market might be a crucial part of the coping strategy that allows farmers to adjust their crop profits, improving and facilitating the functioning of such markets in rural areas should be an important component of government’s post-disaster relief policies. Of particular concern is that the land rental market in rural areas of Bangladesh, as well as in many other low-income countries, is an informal institution. More research needs to be conducted on how well such informal land rental markets function in the aftermath of natural disasters, and whether more formal markets would facilitate the role of the rental market in assisting farmers to adjust to the agricultural revenue impacts of disasters.
One important direction of future research is to address the effects of land quantity adjustment on the sustainability of land and soil resources in addition to the agricultural revenue effect explored in this paper. However, since adaptation increases food productivity (Di Falco, Veronesi, and Yesuf 2011), it may imply that farmers actually adapt to food scarcity and not to climatic extremes. This argument justifies the short-term nature of responses to disaster exposure such as adjusting operational land quantity as outlined in this paper. However, since weather extremes are noticed much earlier than changes in mean climate (Katz and Brown 1992), adaptation practices need to be incorporated in short-term investment decisions as well (Fankhauser, Smith, and Tol 1999). Therefore, although the debate will remain whether land quantity adjustments as adaptation to disasters are good for environmental sustainability, farmers’ adoption of this channel of adaptation helps them at least to overcome the immediate harms of a disaster.
Finally, while the estimates of total marginal effects confirm that both the storm- and flood-affected farmers were able to benefit from land rental transactions, our results for flood exposure need to be interpreted with caution due to increased soil fertility at the aftermath of floods. Floods probably provide open-access irrigation coverage for the affected land plots in the subsequent cropping seasons (Banerjee 2010a), which may result in increased agricultural income of the flood-affected farmers. Future research on this topic may also considering further extension to incorporate flood-induced increased soil fertility effect as well.
Related:
From 2000 to 2015, Bangladesh suffered 29 major floods and 40 storms, resulting in nearly 8,000 deaths and $5.6 billion in losses from damage to property, crops, and livestock. During the same period, Pakistan experienced 45 floods and 5 storms from 2000 to 2015, which caused 6,000 fatalities and $20.7 billion in economic losses….
Climate change has made it much more difficult to predict extreme weather shocks. Using two unique datasets covering 800 families in Bangladesh and 2,000 families in Pakistan, we found evidence that affected villagers do change their employment strategies and savings behavior in response to these shocks.
Facing a sudden loss in income from floods or storms, Bangladeshi farmers take up work outside of agriculture whereas off-farm laborers put in more hours at work to earn a few extra takas, while in Pakistan farmers move away from agriculture as an immediate response but then return to their fields about a year later. Instead of stashing away some cash as savings, farmers in both countries invest in livestock to revive their post-disaster agricultural activities and sustain future consumption.
These strategies help villagers overcome the immediate losses from disaster exposure. It is a good example of how farmers finance the reconstruction process on their own in addition to the post-disaster recovery funds they may receive from the government.
2. AERE Summer Conference: Papers on Developing Countries
Chan & Aldy examine to what extent activities under the Clean Development Mechanism (#CDM) in China lead to additional aggregate emissions reductions.
Eskander & Barbier show that agricultural households in #Bangladesh leverage portions of their land in rental markets to reduce disaster risk exposure.
Meng et al. identify incomplete risk sharing in the #global food market among countries experiencing spatially correlated shocks to cereal production from El Niño.
Tyagi studies the role of market-based instruments (carbon tax and emission permits) in reducing #India’s emissions according to the commitments of the Paris Agreement. #dynamicCGE #climatepolicy