This study examines factors determining adoption of AWM (Agricultural Water Management) and the effect of AWM on downside risk exposure of farmers in the Nile Basin of Ethiopia. Moment based specification of farm income function is employed to measure downside risk exposure. We apply an endogenous switching regression approach by modeling AWM and downside risk depending on household and farm characteristics and a set of climatic variables based on geo-referenced historical precipitation and

more »

... erature data. Our analysis is based on farm level data collected in 2015. The result indicated that household and farm characteristics, and institutional and climatic factors are the important factors explaining both the adoption of AWM and downside risk exposure. We found that adoption of AWM is more likely under warmer and moisture stress climatic conditions. The result also showed that adaptation to climate change through AWM play a significant and positive role in reducing the downside risk exposure of farm households. It is also found that transitional heterogeneity revealed that farm households who did not adopt AWM would have been benefited more than those who adopted AWM if they did adopt. Equally, farm households who did adopt AWM would have been exposed to downside risk exposure in a higher probability than those who did not adopt if they did not adopt. The finding from this study confirms that adoption of AWM is important for farmers to reduce the likelihood of crop failure. Therefore, the result suggests the adoption and diffusion of AWM in the Nile Basin areas to reduce the probability of crop failure and contract the deleterious effects of climate change.