The Effect of Risk, Ambiguity, and Coordination on Farmers' Adaptation to Climate Change: A Framed Experiment

The risk of losses of income and productive means, due to adverse weather associated with climate change, can differ significantly among farmers sharing a productive landscape. In order to truly understand adaptation patterns to changes in climatic conditions, it is important to learn more about how farmers react to different levels of risk under measurable and unmeasurable uncertainty. Moreover, the costs associated with investments in reduced vulnerability to climatic events are likely to exhibit economies of scope. We explored these issues using a framed field experiment that realistically captured the main characteristics of production and the likely weather-related loses of premium coffee farmers in Tarrazu, Costa Rica. In 2008, the region suffered an extreme, albeit rare, climatic event (tropical storm Alma). In the aftermath of the storm, we expected and found high levels of risk aversion, but also observed farmers making tradeoffs under different risk levels. Although hard to disentangle at first, given the high level of risk aversion, we found that farmers more frequently chose safe options in a setting characterized by unknown risk. Finally, we found that farmers, to a large extent, coordinated their decisions in order to achieve a lower cost of adaptation, and that communication among farmers strongly facilitated coordination.