CLIMATE CHANGE
In many developing countries, agriculture is dominated by millions of small-scale farms that are exposed to negative income shocks such as droughts, floods, and extreme temperatures. In the absence of effective insurance mechanisms, these shocks often force rural households to make drastic adjustments to their consumption and investment choices. One particularly important—and understudied—aspect of this response is how households make decisions about holding onto or selling land after experiencing such negative shocks.
Previous research has shown that the predominance of small farms is a significant constraint on agricultural productivity (Foster and Rosenzweig 2022), and that this pattern is partly the result of institutional distortions that hinder efficient land allocation (Adamopoulos and Restuccia 2014). Less understood, however, is how the dynamics of household consumption and investment in the wake of negative income shocks determine the farm size distribution in an economy. In Arteaga et al. 2025, we study how negative weather shocks influence land transactions and farm size in developing countries.
