Risk transfer policies and climate-induced immobility among smallholder farmers

Smallholder farmers will be impacted substantially by climate change and need to adapt. Agent-based modelling shows that interventions, particularly cash transfer paired with risk transfer mechanisms, lead to increased migration and uptake of cash crops, with higher income and lower inequality. Climate change is anticipated to impact smallholder farmer livelihoods substantially. However, empirical evidence is inconclusive regarding how increased climate stress affects smallholder farmers' deployment of various livelihood strategies, including rural-urban migration. Here we use an agent-based model to show that in a South Asian agricultural community experiencing a 1.5 C-o temperature increase by 2050, climate impacts are likely to decrease household income in 2050 by an average of 28%, with fewer households investing in both economic migration and cash crops, relative to a stationary climate. Pairing a small cash transfer with risk transfer mechanisms significantly increases the adoption of migration and cash crops, improves community incomes and reduces community inequality. While specific results depend on contextual factors such as risk preferences and climate risk exposure, these interventions are robust in improving adaptation outcomes and alleviating immobility, by addressing the intersection of risk aversion, financial constraints and climate impacts.

Automated summary

Smallholder farmers will be significantly affected by climate change, requiring adaptations. Interventions like cash transfers and risk transfer mechanisms can lead to increased migration and cash crop adoption, resulting in higher income and lower inequality. Results may vary depending on contextual factors such as risk preferences and climate risk exposure.