Production Risk, Food Security and Crop Biodiversity: Evidence from Barley Production in the Tigray Region, Ethiopia

This paper investigates the effects of crop biodiversity on farm productivity and risk management in the Tigray region of Ethiopia. Using a moment-based approach, the analysis relies on a flexible stochastic production function approach (Antle, 1983). Data are from 205 farms producing barley. Econometric results show that maintaining a larger number of barley varieties in the fields supports productivity and reduces the risk of crop failure. To study the welfare implications of diversity, a simulation exercise is presented. The analysis provides evidence that diversity helps reduce the risk of crop failure and the cost of risk (as measured by a risk premium). In general, the skewness effect can differ from the variance effect. In the context of biodiversity effects evaluated at sample means, we find that the skewness effect dominates the variance effect. Thus, under such circumstances, reducing the odds of crop failure can be more relevant that reducing yield variance