Economic benefits of climate-smart agricultural practices: empirical investigations and policy implications

Abstract Adopting climate-smart agricultural practices (CAPs) has the potential to mitigate the adverse effects of climate change and directly influence the well-being of households. Therefore, this research investigates the impact of CAP adoption intensity on household income, net farm income, and income diversity, using the 2020 China Rural Revitalization Survey data. We utilize the approach of two-stage residual inclusion (2SRI) to mitigate the endogeneity of CAP adoption intensity. The results show that CAP adoption intensity positively and significantly affects household income, net farm income, and income diversity. Heterogeneous analysis indicates that the impacts of CAP adoption intensity on household income increase across the selected quantiles, but the impacts on net farm income decrease across the same. In addition, CAP adoption intensity significantly improves income diversity only at the 20th quantile. Our findings suggest that enhancing farmers’ CAP adoption intensity improves rural household welfare.