Adaptation to Natural Disasters through the Agricultural Land Rental Market: Evidence from Bangladesh

Abstract

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 the adjustments in the quantity of operated land (i.e. extensive margin) and agricultural yield conditional on the land quantity adjustments (i.e. intensive margin), based on selectivity-corrected samples of rental market participants. Employing a household survey dataset from Bangladesh, we find that farmers were able to ameliorate 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.

Land rental markets as a poverty reduction strategy: evidence from Southeast Asia

“…However, renting out land is not used as an adaptation strategy for self-reported environmental shocks. This supports that households use land rental markets to increase the operational size and optimize land use, as in Eskander and Barbier (2017). As in this analysis, Eskander and Barbier (2017) find that environmental shocks positively affect rent-in decisions and negatively affect rent-out decisions in Bangladesh.…”

“…This supports that households use land rental markets to increase the operational size and optimize land use, as in Eskander and Barbier (2017). As in this analysis, Eskander and Barbier (2017) find that environmental shocks positively affect rent-in decisions and negatively affect rent-out decisions in Bangladesh. The results regarding renting out land oppose Gebregziabher and Holden (2011) and Abid et al (2016) that households may rent out to reduce future climate risk, counteract climate impacts with additional rental income or reduce operating costs.…”

“…Households should combine different mitigation strategies, such as renting land and crop diversification, to mitigate climate Research so far has focused on renting out, while our results show that renting in land can also be a useful adaptation strategy in the presence of a land market as present in Vietnam. Renting in land as an adaptation strategy was also suggested by Eskander and Barbier (2017). Renting out as an adaptation strategy is mentioned across several studies in Pakistan (Abid et al, 2016;Amir et al, 2020;Bakhsh and Kamran, 2019) and is a valid strategy to mitigate food insecurities caused by shocks in Ethiopia (Gebregziabher and Holden, 2011).…”

“…At the same time, the difference between the amounts of land rented in and rented out in exposure to extreme weather events and non-exposure determines the indirect effect. Eskander and Barbier (2017) find that participating in land rental markets may be valuable in reducing the impact of natural disasters in Bangladesh. Zhang et al (2018) expand upon Eskander and Barbier's (2017) research by employing precipitation and temperature data as climate variables.…”

“…Studies find that major adaptation strategies on the farm and household levels include changing crop varieties or species, an adjustment in water management, differing use of fertilizers or pesticides, soil management, improving pest or disease management, change in land use and more (Howden et al, 2007;Nguyen et al, 2021a;Abid et al, 2016;Yang et al, 2016). Coping mechanisms in the area of land use practices include fallowing, changing farming or land area and the use of land rental markets (Bryan et al, 2013;Nguyen et al, 2021a;Yang et al, 2016;Gebregziabher and Holden, 2011;Zhang et al, 2018;Eskander and Barbier, 2017). Yang et al (2016) and Esfandiari et al (2020) found that farmers changed the land area cultivated in drought scenarios.…”