Improving Welfare through Climate-friendly Agriculture: The Case of the System of Rice Intensification

We use rich survey data to investigate the impact of a climate-friendly rice farming method known as the system of rice intensification (SRI) on the welfare of rain-dependent small-holder farmers in Tanzania. SRI reduces water consumption by half, which makes it a promising farming system in the adaptation to climate change in moisture-constrained areas, and it does not require flooding of rice fields, resulting in reduced methane emissions. Endogenous switching regression results suggest that SRI indeed improves yield in rain-dependent areas, but its profitability hinges on the actual market price farmers face. SRI becomes profitable only when the rice variety sells at the same market price as that of traditional varieties, but results in loss when SRI rice sells at a lower price. We argue that the effort of promoting adoption of such types of climate-friendly agricultural practices requires complementary institutional reform and support in order to ensure their profitability to small-holder farmers.JEL: D13, J32, O33, Q1