Do climate change adaptation practices improve technical efficiency of smallholder farmers? Evidence from Nepal

This paper provides one of the first empirical studies that examine the impact of climate change adaptation practices on technical efficiency (TE) among smallholder farmers in Nepal. An adaptation index is used to explore the impact of farmers' adaptation on TE using the stochastic frontier analysis framework. Data for six districts of Nepal representing all three agro-ecological regions (terai, hill, and mountain) were collected from a focus group discussion, a stakeholder workshop and a household survey. The survey shows that about 91% of the farming households have adopted at least one practice to minimize the adverse impacts of climate change. Empirical results reveal that adaptation is an important factor explaining efficiency differentials among farming households. Those adopting a greater number of adaptation practices on a larger scale are, on average, found to be 13% more technically efficient than those adopting fewer practices on smaller scale. The empirical results also show that average TE is only 0.72, indicating that there are opportunities for farming households in Nepal to further improve productive efficiency, on average by 28%. Other important factors that explain variations in the productive efficiency across farming households include farmer's education level, irrigation facilities, market access, and social capital such as farmer's participations in relevant agricultural organizations and clubs. This study provides empirical evidence to policy makers that small scale adjustments made by farmers in response to climate change impacts are effective in improving farmers' efficiency in agriculture production. This indicates a need for farmers' involvement in climate change adaptation planning.