Adaptation to natural disasters through the agricultural land rental market: evidence from Bangladesh

We examine the effects of natural disaster on agricultural households who make rent-in or rent-out transactions in the land rental market. Our econometric approach accounts for the effects of disaster-exposure both on the adjustments in the quantity of operated land (i.e. extensive margins) and agricultural income conditional on the land quantity adjustments (i.e. intensive margins). Using a household survey dataset from Bangladesh, we find that farmers were able to ameliorate their losses from exposure to disasters by optimizing their operational farm size through transactions in the land rental market. We also find that although larger farmers receive higher total benefits, rent-in transactions help especially the smallholder farmers to either overcome or reduce their losses. These results suggest that the land rental market may be an effective instrument in reducing disaster risks, and post-disaster policies should take into account this role more systematically. Finally, our results are robust to alternative definition of exposure, alternative estimation method, and alternative definitions of welfare measures.