The results have important policy implications for providing additional water sources to rainfed smallholder agriculture, particularly through irrigation. The government can play an important role in providing additional water sources to farmers through irrigation. On the other hand, for farms with irrigation both the interaction terms were also significant at the 1% level.

# **_6.4 Marginal effects of climate variables on net farm revenues_**

The study also calculated the marginal impacts of a change in each climate variable (temperature and precipitation), using results from the Standard Ricardian model (Table 7), in order to help interpret the climate coefficients. These values depend on the regression equation that is being used and the climate that is being evaluated. The marginal effect of temperature and precipitation is evaluated at the mean for each sample; for instance, the marginal effect of summer temperature on rainfed is evaluated at the mean temperature of rainfed. Table 8 shows the mean seasonal temperature and precipitation for the sample.

The results shown in Table 9 are based on the results from using coefficients from Table 7. They indicate that higher summer temperatures have mostly negative effects on net farm revenues, implying that further increases in temperature would be harmful to agricultural activities in the country. A further increase in summer temperature by 1 _°_ C would reduce net farm revenues by about $86 per hectare for all farms and about $98 for rainfed farms and $76 for farms with irrigation. Increases in the spring temperature also decrease net farm revenues. However, increases in winter and autumn temperatures are beneficial to crops and increase net farm revenues by about $34 per hectare for all farms and about $45 for rainfed farms and $69 for farms with irrigation.

An increase in precipitation has positive effects on net farm revenues, particularly for summer and spring. An increase of one millimeter in summer precipitation would result in an increase in net farm revenues of about $39, $31 and $25 per hectare for all farms, rainfed farms and farms with irrigation respectively. The increases in winter and autumn precipitation show almost similar results and both have positive effects on net farm revenues. The results points to the importance of more summer rain for successful farming in the country. More rainfall is associated with positive gains in net farm revenues, and the possible explanation for this observation is that there have been recurring droughts in the country since 2000. More rainfall will therefore be crucial for successful farming in most parts of the country.

The elasticity results show that net farm revenues are highly sensitive to changes in climate and the elasticities are relatively high for both summer temperature and precipitation. This is the main cropping season and changes in climate variables in this season have relatively high impacts on net farm revenues compared to the other seasons. It is important also to note that rainfed farms are highly sensitive to changes in temperature and precipitation and they are affected most by these changes as they have relatively high elasticities.

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