Does Experienced Weather Affect Farmers’ Conservation Practices? Evidence from Peru

Peruvian agriculture is estimated to be subject to the greatest impacts of climate change in South America. Resulting shifts in rainfall patterns and extreme temperature realizations impose more frequent abnormal weather shocks on farmers and their production decisions. I study the impact of such shocks on farmers’ choice of farming practices; namely, the use of practices reducing soil degradation, practices aimed towards water conservation, and application of chemical fertilizer. I utilize unique cross-sectional data from National Agricultural Survey over the years 2014 to 2016 in conjunction with long-term climate data, constructing georeferenced shocks posed by unusual rainfall levels as well as unusual variation. I then apply fixed effects estimation to analyze how experienced shocks and, plausibly, changed perception regarding the riskiness of their environment affect farmers choice of practices over the agricultural years following the shock(s). My analysis shows that 1) rate of fertilizer users goes up by 9 percentage points following a drought year, 2) use of water conservation practices increases drastically after a combined shock of low rainfall and high variability of it, and 3) use of soil practices does not respond to previous year’s shock but tends to increase after multiple years of abnormal weather. Some demographic differentials in responses are found.