The Effect of Climate Change Adaption strategies on Household Welfare in Rural Ethiopia: A Panel Endogenous Switching Estimation

Abstract Climate change has had a serious effect on farm output, especially in Sub-Saharan Africa. To reduce the effect of climate change farmers require adopting mitigation strategies. Systematic use of crop rotation and improved seed is a pathway to increase farm income, but adoption of these strategies remains low. We investigate the effect of climate change on farm households’ welfare in terms of farm income and explore whether the adoption of crop rotation and improved seed varieties is a strategy to increase household income. In this paper, we use household-plot level data which was collected by World Bank and Central Statistical Agency (CSA) from 2011/12 to 2015/16 from rural farm households in Ethiopia. Using the three-wave panel data, the authors estimate the maximum likelihood endogenous switching regression model (MLESM) to measure the effect of climate change adaption strategies on the farm household’s welfare. The results suggest that the adoption of crop rotation and improved seed varieties helps to improve the well-being of farm households and build a resilient livelihood in rural Ethiopia. Furthermore, beyond average, we find that the effectiveness of crop rotation and improved seed is varied across farm households. Thus, policymakers should consider this heterogeneity and the adoption history of farmers when they aim to improve the practice of crop rotation and improved seed for the particular poor farmers to increase the effectiveness of the strategies.