Endogenous Technology Choice, Risk, and Welfare in Smallholder Farming Systems Under Climate Uncertainty in the North East Nigeria

The intersection of technology choice, risk management, and household welfare under climate uncertainty presents a theoretically and empirically complex problem in smallholder agricultural economics. In North East Nigeria, where rainfall variability has intensified and conflict has compounded livelihood vulnerability, endogenous technology adoption decisions driven by risk considerations may systematically differ from those predicted by expected utility maximisation frameworks. This study developed and tested an endogenous technology choice model incorporating climate risk, ambiguity aversion, and multi-dimensional poverty measures using data from 460 farming households across Adamawa, Taraba, and Gombe States. A non-expected utility framework was adapted to accommodate ambiguity aversion alongside standard risk aversion, allowing the model to distinguish between uncertainty-induced and risk-induced adoption inhibition. Structural equation modelling and simulated maximum likelihood estimation were applied. Results demonstrated that ambiguity aversion toward rainfall outcomes explained approximately 22 percent of the adoption gap for drought-tolerant varieties over and above risk aversion effects, representing a distinct welfare-relevant constraint not captured in standard models. Climate information provision simulations suggested significant welfare gains realisable through improved local climate forecast services. This study makes original theoretical and empirical contributions to the agricultural economics of decision-making under uncertainty in conflict-affected dryland systems of Nigeria. Keywords: endogenous technology choice, climate uncertainty, ambiguity aversion, North East Nigeria, household welfare.