A Microeconometric Analysis of Adapting Portfolios to Climate Change: Adoption of Agricultural Systems in Latin America

This paper develops a microeconometric analysis of adapting portfolios in response to climate change using information on South American farmers' adoption of agricultural systems taken from approximately 2,000 household surveys. The results show that farmers in a hotter climate prefer a mixed system over specialized systems either in crops or livestock. Under a hot and dry scenario, the land values of all three systems would fall, but the damage would be much smaller in the mixed system (-10%) than for the farms specializing in crops (-20%). Farmers are predicted to lose 8% of their land's value under the Canadian Climatic Center (CCC) scenario, but only 2% under the Parallel Climate Model (PCM). Losses would increase to 18% if they do not adapt.