Productivity response and production risk: A study of mangrove forest effects in aquaculture in the Mekong River Delta

In Vietnam, most households that are allotted rights to mangrove forests are allowed to convert forestland into surface water to build mixed mangrove-shrimp farming systems. One result has been deforestation in mangrove forests in an effort to increase production. However, mangroves play multiple roles in shrimp yield, and their net effect is an empirical question. In addition, mangroves can reduce production risk, such that clearing mangroves can increase risk. Utilizing panel survey data of extensive and semi-intensive aquaculture farms in the Mekong River delta of Vietnam, this paper applies the Just-Pope framework to examine the impact of mangrove forests on the productivity and the volatility of output. The results show robust evidence that mangrove forests have a negative but risk-reducing effect on shrimp yield and justify the hypothesis that farmers can earn higher revenue, but at higher risk, when converting more mangrove into water surface. Therefore, a risk-averse farmer would preserve more mangrove forests than the risk-neutral farmer.