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Time discounting and implications for Chinese farmer responses to an upward trend in precipitation

Ding, Yihong, Balcombe, Kelvin and Robinson, Elizabeth (2021) Time discounting and implications for Chinese farmer responses to an upward trend in precipitation. Journal of Agricultural Economics, 72 (3). 916 - 930. ISSN 0021-857X

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Identification Number: 10.1111/1477-9552.12434

Abstract

This paper studies Chinese grape growers’ time discounting and its implications for the adoption of technology that can reduce the negative effects of increasing precipitation. Using primary data collected in Xinjiang Province, we undertook a contingent valuation of rain covers that protect fruit from rain and estimated a discounted utility model using these data. Using a hierarchical Bayesian approach, we find that local grape growers discount the future very heavily, with a discount rate of 0.17 per year, which is almost four times higher than the Chinese market interest rate. Farmers also tend to underestimate the benefits of adopting covers, with their purchase decisions appearing to largely depend on their past actual losses rather than future anticipated losses. These findings have broader implications for policies promoting proactive adaptation in response to likely increased rainfall in the region. Targeting farmers who give lower weight to events far off in the future and understanding that many farmers may tend only to make adoption decisions that have strong short-term benefits could improve the efficacy of climate policies that target agricultural technologies.

Item Type: Article
Official URL: https://onlinelibrary.wiley.com/journal/14779552
Additional Information: © 2021 The Authors
Divisions: Grantham Research Institute
Subjects: H Social Sciences > HD Industries. Land use. Labor
S Agriculture > S Agriculture (General)
H Social Sciences > HB Economic Theory
JEL classification: C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods: General > C11 - Bayesian Analysis
O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O13 - Agriculture; Natural Resources; Energy; Environment; Other Primary Products
Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q1 - Agriculture > Q12 - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q1 - Agriculture > Q16 - R&D; Agricultural Technology; Agricultural Extension Services
Date Deposited: 25 Jan 2022 16:12
Last Modified: 31 Jan 2022 10:48
URI: http://eprints.lse.ac.uk/id/eprint/113546

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