Distributional Impact of Climate Change on Smallholder Agriculture in Sri Lanka

Working Paper no. 110-16

his research develops a methodology based on the popular agricultural household model that take the nature of agricultural producers and the full income of households into consideration in predicting changes of welfare due to climate change. The effect of climate change on the choice of livelihood, as well as income from a given livelihood is analysed using a cross sectional data set from Sri Lanka. First, a multinomial logistic regression was estimated to model livelihood choice to assess whether it is climate dependent. Second, to assess the variations in the impact of future climate on the chosen livelihood strategies separate regression equations were estimated for each livelihood strategy. Predictions for a future climate were made using the model with household characteristics as it fits data better than the other two models.The recent IPCC predictions of temperature and rainfall were used in the predictions. Results reveal that there is a clear case of climate playing a significant role in livelihood choice by farmers. Of the livelihood choices considered, three strategies were found to be resilient to changes in climate: Tea and rubber, Coffee/pepper/betel and the wage labour strategy. They
show a positive change in welfare with the changes in climate. The spatial distribution of the welfare impacts show that resilience/vulnerability of
livelihood strategies vary spatially. This study highlights the importance of developing opportunities for farmers for off farm strategies and also to give due consideration of the spatial distribution of impacts when designing climate policies.