Decision-making under Climate Shocks and Economic Insecurity: Ranching in Rural Baja California Sur, Mexico

Climatic shocks and economic insecurity challenge the wellbeing of livestock managers, globally. Scholars argue that ranchers pursue different economic strategies (herd composition and uses) because of the effects of variation in wealth on risk preferences. However, intergenerational wealth transfers and experiences of loss could also explain these outcomes. There are no tests comparing which of these interpretations more closely align with decisions ranchers employ. Accordingly, we examine how ranchers from rural Baja California Sur, Mexico adjust herd compositions and uses across varying economic (i.e. land security) and environmental conditions (i.e. drought vs non-drought years). Our results indicate 1) both socio-economic condition and intergenerational transfers are associated with herd composition – people on secure land and whose parents ranched cattle have more cattle, 2) herd composition influences consumption patterns – people focusing on goat production eat a greater percentage of their livestock relative to those with cattle regardless of ecological condition, 3) socio-economic variation influences sales and maintenance under normal ecological conditions – people living on secure land place proportionally more livestock into sales, while the land insecure focus on maintenance, and 4) experience with drought-induced livestock losses, but not land security, explains variation in how people respond to an ecological shock – those experiencing larger losses place greater effort in keeping herds alive rather than sales, suggesting they become risk averse. Our results indicate that socio-economic variability influences risk preferences under benign ecological conditions; however, these preferences are flexible in the face of economic losses.