Graduate Thesis Or Dissertation
 

Effects of Water Scarcity, Climate Variability, and Risk Management Policy on Adaptive Agricultural Production Decisions

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https://ir.library.oregonstate.edu/concern/graduate_thesis_or_dissertations/h415pj167

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  • Water scarcity and extreme weather present substantial risks for agricultural production on the U.S. West Coast. Farmers adapt to water supply uncertainties and climate risks by changing water application rates, adjusting irrigated acres, adopting more efficient irrigation technology, and altering crop mix. Many policy options are available to attain sustainable agricultural development. The federal crop insurance program (FCIP) is a primary risk management tool for U.S. agriculture. Improving the design of risk management policy necessitates a deeper theoretical understanding and credible empirical measurement of production decisions connected with land and water use. To this end, we first examine the impact of water scarcity and climate variability on adaptive land use and irrigation strategies. We then investigate how alternative risk management policies affect production decisions. We analyze how water availability, water supply institutions, and climate affect agricultural producers’ land and water use decisions. We first present a theoretical model to characterize farmers’ behavior in the presence of climate risk and water availability uncertainty. From the model, we derive the conditions for optimal production decisions and identify key parameters affecting land allocation, irrigation technology adoption, and water application rates. We then estimate a system of equations jointly to investigate how farmers adapt to different climate and water conditions with detailed irrigation and climate data for producers located in the states of California, Oregon, and Washington. The estimation results add to our understanding of producers’ adaptations to risks and contributes to improving water resource management. Crop insurance may affect harvested acreage and yield by influencing producers’ behavior such as land allocation and input use. Although specialty crops are a major source of farm income, especially on the U.S. west coast, they have not received as much attention as field crops in previous empirical studies. We assess the effect of moral hazard and adverse selection associated with the federal crop insurance program on the acreage and yield of major specialty crops in California. An econometric method that expands the switching regression model is developed to assess the effect. Results suggest that federal crop insurance can change specialty crop growers’ production responses to climate and soil conditions. The moral hazard effect tends to increase the acreage and yield of the specialty crops, while the adverse selection effect tends to have the opposite effect. The overall effect of the federal crop insurance program on acreage and yield of specialty crops is found to be moderate.
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  • Ongoing Research
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  • 2021-06-09 to 2023-07-10

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