Risk management under climate change and its implication on technical efficiency: Evidence from Senegal

Abstract

Using empirical data from a nationally representative farm household survey in Senegal, this study evaluated the impact of different risk management strategies employed by farm households on technical efficiency (TE). The findings of the study suggest that risk management has implications for TE. We find that the use of ex-post risk management strategies is associated with relatively higher technical efficiencies with respect to the meta-frontier compared to other risk management strategies. Households employing only ex-ante risk management strategies were observed to be the least technically efficient in comparison to households employing other risk management strategies. The findings also suggest that managing production risks using multiple strategies does not necessarily result in the highest TE gain compared to the use of single strategies. The findings underscore the need to evaluate the trade-offs and likely consequences of risk management approaches used by farm households to provide countermeasures to deal with any adverse related effects.