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Time discounting and implications for Chinese farmer responses to an upward trend in precipitation

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  • Ding, Yihong
  • Balcombe, Kelvin
  • Robinson, Elizabeth

Abstract

This paper studies Chinese grape growers’ time discounting and its implications for the adoption of technology that can reduce the negative effects of increasing precipitation. Using primary data collected in Xinjiang Province, we undertook a contingent valuation of rain covers that protect fruit from rain and estimated a discounted utility model using these data. Using a hierarchical Bayesian approach, we find that local grape growers discount the future very heavily, with a discount rate of 0.17 per year, which is almost four times higher than the Chinese market interest rate. Farmers also tend to underestimate the benefits of adopting covers, with their purchase decisions appearing to largely depend on their past actual losses rather than future anticipated losses. These findings have broader implications for policies promoting proactive adaptation in response to likely increased rainfall in the region. Targeting farmers who give lower weight to events far off in the future and understanding that many farmers may tend only to make adoption decisions that have strong short-term benefits could improve the efficacy of climate policies that target agricultural technologies.

Suggested Citation

  • Ding, Yihong & Balcombe, Kelvin & Robinson, Elizabeth, 2021. "Time discounting and implications for Chinese farmer responses to an upward trend in precipitation," LSE Research Online Documents on Economics 113546, London School of Economics and Political Science, LSE Library.
  • Handle: RePEc:ehl:lserod:113546
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    More about this item

    Keywords

    China; contingent valuation; grape; hierarchical Bayesian approach; increased rainfall; technology adoption; time discounting;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • Q16 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - R&D; Agricultural Technology; Biofuels; Agricultural Extension Services

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