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by: Marc Völker, Songporne Tongkrusawattana and Hermann Waibel 1 ,

Institute of Development and Agricultural Economics,
Faculty of Economics and Management, Leibniz University Hannover

Background paper for Conference on

Targeting the Environments of the Poor in the Context of Climate Change and
the Green Economy, 24-26 Nov 2010, New Delhi

1. Thailand and Vietnam are two emerging market economies where poverty
has declined to less than 10 % and 20 % head count ratio respectively in 2008.
However vulnerability to poverty remains an issue especially in the rural areas.
Climate change is one factor which may lead to increased frequency and severity of
extreme weather events and can add to environmental degradation and damage
natural resources. As the environment in which the poor live is crucial for their well-
being, changing climate change related ecological and socio-economic conditions will
affect the poor’s livelihoods, income, and living conditions. To date most models on
climate change are highly uncertain in their predictive power. They also often do not
take into account the perspective of individuals who are affected by climate change.
This is partly due to lack of attention to people’s concern. Another reason is that the
data base for making analysis and policy recommendations is usually historical and
too much oriented towards physical data (such as rainfall, temperature and wind
speed) and less so on people’s coping actions.
In this paper a comprehensive data set of some 4400 households from six provinces
in Thailand and Vietnam derived from two rounds of surveys in 2007 and 2008 is
analyzed to assess the different types of shocks and risks experienced by rural
households and the coping actions they undertake to deal with these shocks. The
data were collected in the context of a long term research project of four German
universities sponsored by the German Research Association on the impact of shocks
on vulnerability to poverty: in emerging Southeast Asian Economies, namely in
Thailand and Vietnam. The survey instrument contained a comprehensive shock and
risk section to collect retrospective information about shock experience and current
risk perception towards a wide range of shock scenarios. Also information on coping
strategies including their costs and scope are available for each type of risk.

Currently on secondment with the Rural and Sustainable Development Division (RSDD) at the Asian Development
Bank (ADB), Manila, Philippines
The paper raises three questions, which are believed to be important in relation to
the design of public interventions aimed at mitigating the negative consequences of
climate change:
• Based on subjective perception of rural households how important are
climate-related risks relative to other experienced shocks.
• To what extent do these households undertake climate-related ex-ante risk
management actions?
• Is there a relationship between individual risk perceptions and ex-ante risk
management actions?
Results show that rural households in both Thailand and Vietnam experience
climate-related shocks and rank them highest among different types of other shocks.
On average households in both countries experienced around two climate shocks
between 2002 and 2008. The perceived severity of climate-related shocks was
higher in Vietnam by a factor of three as compared to Thailand. Results further show
that households are pessimistic with regards to expected future risks, i.e. much more
risks are expected in the future than what has been experienced in terms of shocks
in the past. Again the expected frequency and severity of risks is highest for climatic
The data further show that about one third of households in Vietnam and slightly less
than 20 % in Thailand undertake actions related to climate risk related ex-ante
management including collective action and individual investments. A positive
relationship between climate change experience and risk perception can be
established although other factors modify the intensity of this relationship. However
the relationship between risk perception and specific climate-related ex-ante coping
measures is less clear and requires further analysis.
In conclusion, rural households are well aware of climatic-related hazards and adapt
to such risks. Risk communication processes between disaster management
institutions and agricultural communities can thus build on such knowledge. The
study provides a comprehensive starting point for climate risk perception and ex-ante
climate risk mitigation analysis focusing on small-scale rural households. As a next
step in the analysis the need for supportive measures of rural households ex-ante
climate risk related mitigation measures and the constraints to community-based
collective action measures will be explored.
2. Climate change especially affects agriculture and countries in Asia may
suffer high adaptation costs. Climate change can lead to increased frequency and
severity of extreme weather events (IPCC 2007) and continued environmental
degradation (Millennium Ecosystem Assessment 2005). Hence its consequences can
be severe for agriculture in developing countries. Especially households in remote
rural areas in Asia suffer from damages to natural resources as these are crucial for
their livelihoods (World Bank 2005). As a consequence, agriculture in some Asian
countries is likely to be faced with considerable adaptation costs (ADB 2009).
One of the limitations of studies that aim to model climate change and their
consequences is that they are based on historical data of climate-related variables
such as temperature and rainfall (e.g. Boisvert 1990, Ngyuen Tuong 2010). Models
built on historical data normally do not take into account the perspective of those who
are affected by climate change. Economic computable general equilibrium models
(CGE) (e.g. Azis and Salim 2004) derive their assumptions from aggregate supply
and demand elasticities, which often poorly reflect micro behavior. While such
models can be useful in forecasting future scenarios they have their limitations for
making concrete policy recommendations. In order to improve the practical relevance
of models which can guide effective and efficient public interventions information on
coping strategies used by the target population and the subjective risk expectations
of decisions makers will be useful. It has been shown in studies on climate risk in
developing countries that risk perceptions of the poor are related to their experience
with past events (e.g. Paul 1984, Wong and Zhao 2001, Ologunorisa and Adeyemo
2005). In this study a comprehensive data set of some 4400 households from six
provinces in Thailand and Vietnam is available to assess the different types of
shocks and risks experienced by rural households and the coping actions they
undertake to deal with these shocks.

3. The paper addresses the subjective assessment of climate-related risk

by those affected. The paper raises three questions which are important in relation
to a better understanding of the factors that can affect the potential success of public
interventions aimed at mitigating the negative consequences of climate change:
• Based on their subjective perception how important are climate-related risks
for rural households in Thailand and Vietnam relative to other shocks
experienced during the recent past.
• To what extent do these households undertake climate-related ex-ante risk
management actions?
• Is there a relationship between individual risk perceptions and ex-ante risk
management actions?

The contribution of this study is in the field of advancing the empirical basis for
climate-related modeling in agriculture in Asia. The study provides empirical evidence
on the importance of climate-related shocks experienced by rural households in
Thailand and Vietnam and how these relate their expectations and associated coping
4. Methodology to explain subjective risk expectations and coping
strategies. A three-step regression approach is applied to identify possible linkages
between past shock experience and future climate risk perception, and households’
decisions to apply ex-ante risk management strategies (for details on the modeling
procedure see Tongkruksawattana et al. 2010). In the first step an ordinary least
squares (OLS) regression model to estimate the households’ subjective risk
perception as the dependent variable and climate-related shocks on households’ risk
perception and socio-demographic factors as independent variables. The OLS model
takes the following form:

Ri = λ Sic + φ X ir + γ Pp (1)

where i indexes household and Ri is an ordinal risk score which indicates the
magnitude of climate risk which a household expects to happen in the future. In the
household questionnaire respondents were asked to quantify both the expected
frequency of each climate shock type which they expected to happen in a 5-year
future reference period and the expected severity of each of these events. The
expected severity was stated separately in terms of income and asset loss, and by
using an ordinal scale from 0 (=no impact) to 3 (=high severity). The risk score is
computed by summing the expected severity of each risk event and then multiplying
it with the expected frequency of the event. The sum of the risk scores of all expected
climate shocks of a household is then Ri . Furthermore, Sic is a vector of climate
shock incidents that a household experienced during 2002 and 2008 and X ir is a
vector of socio-demographic characteristics of the interview respondent. Pp is a
vector of dummy variables in order to capture the effect of provinces. λ , φ and γ
are the parameters to be estimated.
The second step is to assess the probability to adopt any ex-ante risk mitigation
action by applying a standard probit model. In the third step the likelihoods of
households taking up the most frequently applied ex-ante risk management
strategies are estimated. A bivariate probit model is used for Vietnam since there are
only two strategies, namely collective action and investment activities. In Thailand a
multivariate probit model is used since there are more than two coping strategies
applied by the households (see Tongruksawattana et al. 2010 for details).

5. Comprehensive panel survey to assess vulnerability to poverty in rural
areas in Thailand and Vietnam. The data used in this analysis were collected in a
long term DFG research project of four German universities (DFGFOR 756) entitled
“Impact of Shocks on the Vulnerability to Poverty: Consequences for Development of
Emerging Southeast Asian Economies”. By using a 3-stage cluster sampling design
a representative sample of the target population of rural and peri-urban households
was obtained (Hardeweg et al. 2007). Focusing on rural households in Northeastern
Thailand and Central Vietnam, a comprehensive survey among some 4,400 rural
households in six peripheral provinces was conducted in 2007 and the same
households were followed-up in 2008. The survey instrument contained a
comprehensive shock and risk section to collect retrospective information about
shock experience and current risk perception towards a wide range of shock
scenarios. Respondents were asked about shock incidents that the household
experienced during the past 7 years from 2002 to 2008, reporting a subjective
assessment of their severity, e.g. high, medium, and low or no impact, their
consequences in terms of income and asset loss, the duration of impact and coping
actions adopted. In addition, respondents were asked to express their subjective
assessment of the occurrence, i.e. the frequency and the severity of future risks to
occur in the next 5 years. Furthermore, information on their ex-ante coping strategies
including the cost and scope of such preventive measures were indicated for each
type of risk.

6. Climate Risk Perceptions of rural Households in Thailand and Vietnam.
Adverse climatic shocks were the most prevalent type of calamity experienced by
households. These includes events like flooding, unusually heavy rainfall, storm,
drought and unusually cold weather which are reported by about three quarters of
households in Vietnam and more than half in Thailand (see Table 1). On average,
each household in both countries was affected by about two climate shocks during
the 7-years reference period between 2002 and 2008 but Vietnamese households
assessed them to be three times as severe as Thai households. Considerable
variation exists across locations as shown in large standard deviations. Next to
climate-related shocks are socio-demographic shocks including health related shocks
followed by biological shocks, such as crop pests and livestock diseases (see Table
1). The two latter shocks can also be related to climate change factors but the data
do not allow inferring any such causality. In Thailand economic shocks, especially
unexpected fluctuations in input and output prices were important too.

7. Rural households expect more climate risks in the future. Differences

exist between experience of shocks between 2002 and 2008 and future risk
perceptions (Error! Reference source not found.). Clearly households are
pessimistic about the incidence of shocks in future, i.e. referring to the period from
2008 to 2013. Remarkably not only do households expect worse in future for events
which they had experienced in the past but they also expect rare events of the past
to occur more frequently in the future. In Vietnam household expect four times more
climate-related risks than experienced before and in Thailand it is still twice as many
events. Results on the impact of climate-related events on household well-being are
inconsistent however. While in Vietnam the estimated impact from shock experience
and risk expectation is similar, households in Thailand expect more severe impact on
income in the future 2 .

8. Flood, drought and storm are expected to increase in the future. Among
the climate shocks experienced flood is number one in Vietnam while drought
dominates in Thailand. Drought is also what the majority of Thai households expect
in the future but in Vietnam it is storms, drought and floods what most rural
households worry about. This is also reflected in the difference between frequency
for these specific climate–related shock events in the past and their future
expectations. For storm and flood Vietnamese households expect these risks to
The difference could be due the difference in the criteria used for shocks (general effect on
household well-being) and for risk (income).
occur four times as much as in the past and drought frequency is higher by a factor
of three. In Thailand most households expect drought, heavy rainfall and flooding to
double and storm events to triple in the future.

9. Why does past experience not match with future expectations? One can
try to find theoretical explanations of the discrepancy between shock experience and
risk perception. One possible explanation is that people not only learn from their own
past experience but also take other sources of information into account as suggested
by learning theories (e.g. Bandura 1986). Another explanation is can be linked to
prospect theory which suggests that risk perception depends on the frame
conditions, i.e. that experience of extreme shock events can alter risk perceptions
(e.g. Rogers 1997).

Table 1: Shock events experienced between 2002 and 2008 and risk types perceived in
2008 (n¹=2146 for Vietnam & 2127 for Thailand)
Source: DFGFOR756.
Vietnam (N = 21461)
2 3
Households (%) Frequency per household Impact on household
Type of events Shock Risk Shock Risk Shock Risk (income)

Climatic 75.2 90.0 1.7 (0.8) 8.4 (6.4) 2.7 (0.5) 2.3 (0.8)
Flooding 34.3 52.7 1.2 (0.5) 3.9 (1.6) 2.7 (0.5) 2.5 (0.8)
Drought 27.3 53.7 1.2 (0.5) 3.1 (1.7) 2.7 (0.5) 2.3 (0.8)
Heavy rainfall 14.9 35.4 1.0 (0.2) 3.3 (1.8) 2.6 (0.6) 2.2 (0.9)
Erosion 1.0 5.0 1.0 (0.2) 2.9 (1.8) 2.9 (0.4) 2.2 (0.9)
Storm 15.9 54.9 1.0 (0.2) 4.2 (1.7) 2.6 (0.6) 2.1 (0.9)
Ice rain 16.5 7.5 1.0 (0.0) 3.4 (1.5) 2.6 (0.5) 2.0 (1.0)

Biological 40.2 75.2 1.3 (0.6) 5.7 (3.2) 2.6 (0.5) 2.3 (0.8)

Socio-demographic 60.1 85.5 1.6 (0.8) 5.5 (3.4) 2.6 (0.5) 1.8 (0.9)

Economic 9.2 41.3 1.1 (0.4) 5.0 (3.1) 2.7 (0.5) 2.2 (0.8)
Thailand (N = 2127 )
Households (%) Frequency per household2 Impact on household3
Type of events Shock Risk Shock Risk Shock Risk (income)

Climatic 53.9 73.2 1.9 (1.4) 4.2 (4.2) 0.9 (0.5) 2.1 (0.9)
Flooding 34.8 22.6 1.6 (1.3) 3.2 (1.7) 0.7 (0.5) 2.3 (0.9)
Drought 41.9 57.3 1.6 (1.1) 3.2 (1.6) 0.8 (0.5) 2.3 (0.8)
Heavy rainfall 2.5 18.7 1.4 (1.3) 2.8 (1.6) 0.5 (0.4) 1.7 (1.2)
Erosion 0.3 1.7 1.0 (0.0) 2.6 (1.8) 0.2 (0.1) 1.9 (1.0)
Storm 2.1 26.7 1.0 (0.2) 2.9 (1.8) 0.4 (0.3) 1.8 (1.2)
Ice rain 0.5 11.5 1.1 (0.3) 2.7 (1.7) 0.5 (0.4) 1.1 (1.2)

Biological 15.3 44.1 1.3 (0.6) 2.5 (3.8) 0.6 (0.4) 1.8 (0.9)

Socio-demographic 51.2 89.0 1.8 (1.3) 4.7 (3.9) 0.9 (0.7) 1.8 (0.9)

Economic 27.5 69.5 1.4 (0.9) 4.5 (4.5) 0.6 (0.5) 2.5 (0.7)
Note: ¹ Complete sample of households with at least 1 nucleus member which were interviewed in both survey waves.
Number of shocks and shock severity were computed exclusively for households affected by the respective shock type.
Standard deviations are presented in brackets. Expected number of risk and risk severity were computed exclusively for
households perceiving the respective risk type. Impact on household measured as ordinal scale from 0 (=no impact) to 3
(=high severity). Households were asked to subjectively estimate the severity of shocks and risks.
10. Monetary consequences of climate-related losses can be severe.
Climate-related shocks caused severe income and asset losses and additional
mitigation and adjustments expenses. As shown in Error! Reference source not
found. in Thailand the financial consequences of climate shocks in 2008 are much
higher as compared to the three other types of shocks i.e. biological, socio-
demographic and economic. Thai households reported income losses of over 1000 $
PPP which is almost twice the amount for economic shocks and three times higher
than for socio-demographic and biological shocks. Using household income of 2007
as a basis climate-related income loss is almost 30 % of the annual income. In
Vietnam monetary losses in absolute and relative terms are much lower than in
Thailand. Although more households reported climate-related events the monetary
loss from economic shocks rank highest, followed by biological and climate shocks.
A possible reason for the much higher climate-related monetary loss from climate-
related events in Thailand is due the generally higher level of income and productivity
of its agriculture. For example, if a high value crop such as fruits or vegetables are
affected by drought the financial consequences are more severe than if this happens
in food staples than corn or rice. Given the nature of climate shocks it is also
plausible that income loss is more severe than asset loss as shown in Table 2.
11. The level of development determines recovery time from shocks. As
shown in table 2 most climate-related shocks are covariate shocks. This is also true
for biological and economic shocks. For example, pest outbreaks will not only affect
one farmer in the village and price shocks will be felt by all households. This is
different for socio-demographic shocks which are household-specific, i.e. they are
idiosyncratic. For covariate shocks traditional safety nets are often ineffective as
especially in poor communities when everybody is affected bilateral help is hardly
possible. This may be one explanation why recovery from shocks in Thailand is
faster than in Vietnam where the general level of development including physical and
financial infrastructure is still lower than in Thailand.
Table 2: Monetary consequences, recovery time and scope of shocks 2008, rural
households in six provinces of Thailand and Vietnam
Source: DFGFOR756.
Vietnam (n = 2146)
Losses Additional Recovery Not yet Others
Income Assets expenditures time³ recovered affected
Type of event n¹ PPP$ PPP$ PPP$ Months % %
Climatic 1078 161.4 29.2 7.8 6.7 36.8 98.4
Flooding 548 170.2 30.8 5.6 4.8 35.2 98.9
Drought 108 415.8 75.3 1.1 5.5 46.7 98.1
Heavy rainfall 39 266.1 48.2 2.4 4.0 30.8 97.4
Erosion 19 147.0 26.6 7.9 4.8 73.7 94.7
Storm 326 90.3 16.4 16.0 3.3 26.2 97.5
Ice rain 355 66.5 12.0 9.8 2.7 45.9 98.6
Biological 466 331.6 60.1 5.0 6.5 49.0 88.6
Socio-demographic 628 51.6 9.3 129.5 7.5 44.4 12.2
Economic 43 411.6 74.6 38.9 8.5 52.4 79.1
Thailand (n = 2127)
Losses Additional Recovery Not yet Others
Income Assets expenditures time³ recovered affected
Type of event n¹ PPP$ PPP$ PPP$ Months % %
Climatic 668 1008.3 97.6 106.2 3.0 38.5 92.1
Flooding 222 979.9 89.2 89.4 3.0 21.0 93.2
Drought 447 1114.4 95.6 100.9 3.2 48.0 94.6
Heavy rainfall 38 462.6 157.8 182.3 2.5 15.8 65.8
Erosion 5 104.8 34.9 378.3 4.3 20.0 60.0
Storm 41 217.2 316.5 75.7 1.5 24.4 80.5
Ice rain 9 181.6 - - 0.9 10.0 66.7
Biological 219 314.2 70.8 73.0 2.4 25.1 79.7
Socio-demographic 655 292.1 264.1 875.9 2.4 43.8 11.3
Economic 389 653.4 41.7 284.4 3.7 65.7 74.3
Note: ¹only households with respective shock incidents. ²in % of total household income 2006/2007.
³Recovery time of events already recovered from.

12. Rural Households do not yet widely use ex-ante risk management to reduce the
effects of climate-related shocks. While rural households in Thailand and Vietnam had
experienced climate-related shocks in the past which had also caused them considerable
financial losses and they expect more climate risks in the near future there is no
corresponding adoption of ex-ante risk management strategies. In Table 3 it is shown that
only about one third of Vietnamese households and only 20% of Thai households applied at
least one ex-ante coping measure. About 13% of households in Vietnam and 8% in Thailand
engaged in collective action in order to build infrastructure that can ameliorate the threat of
climatic hazards. This includes, for instance, river dikes which help to prevent flood water
from inundating agricultural land, and irrigation canals that maintain water provision to
cropping systems during times of drought. Households also jointly manage common property
resources, such as forests and water bodies in order to avoid stock depletion of renewable
natural resources. Collective action as a means to adapt to climate change has become
increasingly important in Vietnam where local-level hazard planning and defense systems
which had been previously provided by the state were decentralized in the mid-1990s (Adger
2003). About 12% of those households in Vietnam and 4% in Thailand undertook individual
investments for example to improve the security of their homestead and in physical
structures and in education. Indeed households reported that they built elevated wooden
platforms as a place of safety retreat when flood waters enter the house. Households also
reported that they bought special equipment to deal with storm, flood and drought and even
spend money to improve their skills on how to deal with such problems. In Thailand

households reported that they shifted their income portfolio away from on-farm to off-farm
employment and they build up savings through buffer stocks (e.g. storage of food and seeds)
as well as financial savings accounts with banks and other financial institutions. For these
measures Thai households spend more than double than households in Vietnam.

Table 3: Ex-ante copings for climate risk perceived in 2008

Source: DFGFOR756.
Vietnam (n = 19321) Thailand (n= 15571)
Cost of ex-ante Cost of ex-ante
Type of coping strategy HH mitigation HH mitigation
(PPP$) (PPP$)
% Mean Std.Dev. % Mean Std.Dev.
Any coping strategy 33.0 63.2 167.3 18.4 1043.8 12497.3

Collective action 13.7 94.8 342.2 8.2 276.9 1076.5

Collective action for infrastructure 12.5 100.7 357.6 8.1 278.6 1080.6
Common property resource management 2.9 37.9 31.0 0.1 58.2 .

Investment activites 11.9 135.4 631.2 3.9 3882.7 25759.5

Investment in security of homestead 11.7 96.9 223.8 0.3 2458.9 5133.7
Investment in physical and human capital 0.2 2310.3 4500.6 3.5 507.8 579.0
Investment in travel safety 0.1 90.6 -

Income portfolio adjustment 3.8 183.3 317.9 2.7 349.3 966.2

Crop, plot, livestock diversifiaction 1.7 151.0 182.8 0.8 732.4 1635.7
Income source diversification 1.6 120.7 105.8 1.8 210.0 483.1
Switch to more secure income sources 0.6 418.3 679.5 0.1 1.0 0.0

Savings 3.6 251.8 361.3 1.6 670.5 1315.7

Buffer stocks 3.2 218.7 212.5 1.3 324.3 620.5
Savings accounts in financial institutions 0.2 792.8 1292.4 0.3 1408.4 2473.5
Membership in savings and credit associations 0.1 176.7 160.2 - - -
Contract insurances 0.1 407.7 64.1 0.1 2910.0 .
Old age annuities 0.1 0.4 -

Others 6.2 94.6 355.4 1.6 1.0 0.4

Migration 2.6 117.5 523.6 0.1 0.0 .
Sharecropper tenancy 0.6 100.5 128.0 - - -
Medical treatment 0.3 48.7 27.1 - - -
Membership in occupational organisations 0.1 163.1 - - -
Preventive health practices 0.1 0.2 0.1 0.0 .
Marriage and extended family 0.1 72.5 - - -
Not specified 2.7 77.3 159.4 1.5 1.0 0.4
Note: ¹ Households w hich perceived climate risk.


13. Causality between climate-related shock experience and risk expectations can
be established. Applying the OLS model the causality between shocks of the past and
future risk expectation can be demonstrated for both countries which supports the findings of
the study of Paul (1984) in Bangladesh. The significant and positive effect of the variables

“number of highly severe climate shocks” and “number of medium severe climate shocks”
shows that the relationship is stronger in Thailand as compared to Vietnam where only highly
severe shocks of the past are significant. The model also shows that location matters, i.e. the
expectations of the households differ among the six provinces in the two countries. For
example, the negative coefficient for the province of Dak Lak in Vietnam indicates that those
households expect less climate risks compared to the other two provinces. This is plausible
as Dak Lak is an inland situated province and thus less exposed to storms coming from the
South China Sea while the two other provinces who are both bordering the sea.
Other significant factors that can shape risk expectations are for example agricultural
occupation, i.e. households more strongly engaged in agriculture worry more about climate
risks than those who earn more from non-farm activities. In Vietnam, membership in socio-
political organizations, increases risk perceptions, which is consistent with the basic tenets of
social learning theories (e.g. Bandura 1971, Rotter 1954). Also, in Vietnam an age effect can
be detected with elder people worrying more about climate risk albeit at decreasing rate.

Table 4: OLS regression of climate risk perception against socio-demographic

Source: DFGFOR756.
Vietnam Thailand
OLS climate risk perception
Coef. t-value Coef. t-value
Respondent characteristics
Agricultural occupation (1=Yes) 6.23 3.84 *** 2.47 2.62 ***
Member in socio-political organization (1=Yes) 4.38 3.65 *** 0.67 0.54
Age (Years) 0.39 2.27 ** -0.04 -0.12
Age squared (Years) 0.00 -2.42 ** 0.00 -0.03
a a
Ethnicity (1=Kinh) 0.75 0.66 - -
Education (Years) 0.10 0.77 -0.10 -0.75
Gender (1=Male) -1.51 -1.59 -0.26 -0.32
Province dummies
Buriram (TH) / Ha Tinh (VN) (1=Yes) -1.68 -0.76 4.87 4.88 ***
Nakhon Panom (TH) / Dak Lak (VN) (1=Yes) -18.90 -8.72 *** 2.44 2.00 **
Climate shock incidents 2002-2008
Climate shocks of high severity (Number) 8.87 7.51 *** 5.19 7.29 ***
Climate shocks of medium severity (Number) 1.42 1.21 2.69 4.27 ***
Interaction terms
a a
Dak Lak * Climate shocks of high severity -6.24 -4.88 *** - -
Constant 6.66 1.18 12.20 1.70 *
P > F (joint significance) 0.00 0.00
R² 0.28 0.10
N 1651 1555
Note: Variables omitted. *P<0.1, **P<0.05, ***P<0.01.

14. Climate risk perception positively influences the likelihood to adopt ex-ante risk
management measures. In Table 5 the results of the adoption model to explain climate-
related risk management strategies used by the households in the two countries are
presented. The dependent variable is the probability that a rural household in 2008 has
adopted any measure suitable to lessen the impact of climate-related events like flood
drought or storm. As explanatory variables the usual location and village variables as well as
household and farm characteristics have been included. The variable of interest is the
climate risk score derived from the household’s subjective assessment of aggregate climate
risk during the near future. The explanatory variables vary slightly between Thailand and
Vietnam to reflect country-specific situations. For example in Thailand an aggregate measure
of wealth was included while in Vietnam, tangible assets and land were separated. In
Vietnam land values are less reliable due to the limitations of the government influenced land

market. Furthermore, to portray the wide spread use of off-farm wage and non-farm self-
employment in Thailand the variable “engagement in agriculture” was included.
The main message of the model is that climate risk perception significantly influences the
households’ decision to adopt climate-related risk management measures. The model also
shows some consistency with the previous one. For example, households in the province of
Dak Lak, in Vietnam, which is less prone to climate change factors, have a lower probability
to adopt ex-ante risk management measures. Similarly, in Thailand the province of Nakhon
Panom, bordering Laos alongside the Mekong River and where households perceive greater
climate risk, the probability to adopt risk management measures is higher. In Thailand richer
households tend to adopt less and in Vietnam if a household belongs to ethnic Kinh majority
he is more likely to adopt. This may be due to the generally poor access of ethnic minority
groups to knowledge and resources. Also, engagement in off-farm wage- or non-farm self-
employment in Vietnam lowers the likelihood of ex-ante climate risk management strategy
use which is consistent with the findings of Phung Duc and Waibel (2010).
Overall the statistical quality of the model can still be improved by a more refined definition of

Table 5: Probit regression of household use of ex-ante climate risk management strategies in
2008, Thailand and Vietnam,
Source: DFGFOR756.
Vietnam Thailand
Probit: Ex-ante climate risk mitigation (1=Yes)
Coef. dF/dx Coef. dF/dx
Household characteristics 2007/2008
Maxiumum education (Years) 0.0023 0.0005 0.0167 0.0031
a a
Wealth per capita (PPP$) - - 0.0000 0.0000
a a
Tangible assets (PPP$) 0.0001 0.0000 - -
Number of household members 0.0389 0.0085 -0.0130 0.0065
Average monthly per capita income (PPP$) -0.0005 -0.0001 -0.0003 * 0.0000
Engagement in off-farm employment (Months) -0.0087 * -0.0019 0.0012 0.0009
Age of household head (Years) 0.0092 0.0020 -0.0250 0.0056
Age of household head squared (Years) -0.0001 0.0000 0.0002 0.0000
a a
Engagement in agriculture (%) - - 0.1474 0.0360
a a
Land size (ha) 0.7966 0.1750 - -
a a
Ethnicity of household head (1=Kinh) 0.4618 * 0.0839 - -

Climate risk score 0.0039 * 0.0009 0.0044 ** 0.0006

Village/province characteristics
Time to district town (Minutes) 0.0013 0.0003 -0.0001 0.0008
Time to market (Minutes) -0.0042 -0.0009 -0.0056 * 0.0009
a a
Off-farm employment as main option (1=Yes) -0.1419 -0.0308 - -
Buriram (TH) / Ha Tinh (VN) (1 = Yes) 0.0782 0.0173 -0.1019 0.0257
Nakhon panom (TH) / Dak Lak (VN) (1 = Yes) -2.3375 *** -0.4282 0.3046 *** 0.0331
Constant -0.9082 -0.2373
P > F (Wald test) 0.0000 0.0001
N 1476 1555
Note: Country-specific omitted variable. *P<0.1, **P<0.05, ***P<0.01. dF/dx indicates the marginal effect of a
one-unit change in the explanatory variable on the probability to use any ex-ante climate risk management

15. Climate risk perceptions in Vietnam provide a good basis for collective actions
to mitigate consequences. To further refine the finding on adoption of climate-related risk
management strategies the previous model has been extended to assess the likelihood of
adopting different practices. For Vietnam these were only two, namely collective actions and

individual investments. In Thailand there were two additional measures, i.e. income
diversification and savings 3 . Results for Vietnam are shown in Table 6. Again the message
is that climate risk perceptions matter albeit only for collective action measures while no
significant coefficient was found for individual investments. However it is interesting and of
great importance for the design of government support measures that there is seemingly
great awareness and perhaps preparedness of rural village households for undertaking
collective action for infrastructure, such as for example the joint construction of dikes and
irrigation canals, in order to reduce their vulnerability to climate risk. Of course the model has
limitations since only the measures undertaken in 2008 are included. This might explain why
the result for individual investments is different. These may depend more strongly on
household specific characteristics such as income and wealth as suggested by the model
results. However the validity of the model is confirmed by some of the location variables
which are underlined with the findings of the previous results. For example, the coefficients
for both dependent variables are negative for the province of Dak Lak, relative to the base
province of Hue which is potentially more directly affected by climate risk. Results are
confirmed for the province of Ha Tinh, which is located some 300 km north of Hue province
situated along the coastline of the South China Sea. Here no significant difference was found
in the collective action variable however this was the case for individual investments. Again,
the results of the third model are just a first step to the analysis and further refinement in the
methodology e.g. through an instrumental variable approach will be done, possibly leading to
more conclusive results.

Table 6: Bivariate probit regressions of Vietnamese household use of collective action and
individual investments for ex-ante climate-related risk management in 2008
Source: DFGFOR756.
Vietnam: Bivariate probit Collective action Investment activities
(N = 1476) Coef. dF/dx Coef. dF/dx
Household characteristics 2007/2008
Maximum education (Years) 0.0014 0.0001 0.0186 0.0000
Tangible assets value (PPP$) 0.0004 *** 0.0000 -0.0002 * 0.0000
Number of household members 0.0543 0.0034 -0.0376 0.0000
Average monthly per capita income (PPP$) -0.0008 -0.0001 -0.0014 0.0000
Ethnicity of household head (1=Kinh) 0.2987 0.0154 0.4713 0.0003
Off-farm employment (Months) -0.0095 -0.0006 0.0025 0.0000
Land size (ha) -2.7192 -0.1712 2.1668 ** 0.0024
Age of household head (Years) -0.0060 -0.0004 0.0115 0.0000
Age of household head squared (Years) 0.0000 0.0000 -0.0002 0.0000

Climate risk score 0.0102 *** 0.0006 -0.0012 0.0000

Village/province characteristics
Off-farm employment = main option (1=Yes) -0.3974 -0.0240 0.2191 0.0003
Time to district town (minutes) -0.0012 -0.0001 0.0036 0.0000
Time to marktet (minutes) 0.0055 0.0003 -0.0010 0.0000
Ha Tinh dummy (1=Yes) 0.1903 0.0125 0.4731 *** 0.0007
Dak Lak dummy (1=Yes) -1.5047 *** -0.0903 -6.1764 *** -0.1632
Constant -1.7788 -1.8934
P > F (Wald test) = 0.0000
Rho (ρ) = -0.2637061***
Note: *P<0.1, **P<0.05, ***P<0.01. dF/dx indicates the marginal effect of a one-unit change in the
explanatory variable on the probability to use collective action for infrastructure and investment in
homestead security, respectively, as ex-ante climate risk management strategy.

In this paper only the results of Vietnam are presented. For Thailand results the reader is referred to
Tongruksawattana et al. (2010) available at

16. Conclusions. The aim of this paper is to advance the empirical basis for climate-
related modeling in agriculture in Asia by incorporating the experience and expectations of
those who will be most affected by climate change, i.e. households in rural areas. Drawing
from a comprehensive panel database of some 4,400 households in Thailand and Vietnam
collected purposively to advance existing concepts of vulnerability to poverty, empirical
evidence on the importance of climate-related shocks is provided. Applying ordinary least
square and probit regression models the linkages between past shock experience and future
climate risk perception and households’ decisions to apply ex-ante risk management
strategies were established.

The main messages of the paper can be summarized as follows:

• Climatic shocks were the most prevalent type of calamity experienced by rural
households during the period since 2002.
• Causality between climate-related shock experience and risk expectations can be
established. Rural households expect more climate risks in the future with flood,
drought and storms as the major fears.
• Climate-related shocks caused severe income and asset losses as well as additional
mitigation and adjustments expenses, which in absolute terms were higher in
Thailand as compared to Vietnam.
• However recovery time from shocks was longer in Vietnam which is perhaps due to
the lower level of physical and socio economic infrastructure.
• Climate risk perception positively influences the likelihood to adopt ex-ante risk
management measures but results for specific measures require further analysis.
17. Recommendations. Results of this study suggest that climate risk perceptions of
rural households can provide a good basis for designing publicly supported collective actions
aimed to mitigate climate risk consequences. Also some indication is provided for the need
for policy measures aimed at reducing entry barriers for rural households to undertake
functional adjustments such as diversification. The analysis can be extended to investigate
the link between climate-related risks and ex-ante risk mitigation measures and vulnerability
to poverty models. This will allow drawing conclusions on the welfare implication of climate
risks and facilitate the design of more effective and location specific social risk management
policies. Furthermore, the data collected and analyzed in this study provide a starting point
for incorporating subjective assessments and information from the ground to be inputted in
climate models and economic models such as CGE models, agent-based or sector-wide
resource allocation models.


The paper benefited much from the comments and suggestions made by Armin Bauer, from
the RSDD at the Asian Development Bank, Manila.


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