Working Paper: CEPR ID: DP8940
Authors: Karen Macours; Patrick Premand; Renos Vakis
Abstract: While climate change is likely to increase weather risks in many developing countries, there is little evidence on effective policies to facilitate adaptation. This paper presents experimental evidence on a program in rural Nicaragua aimed at improving households? risk-management through income diversification. The intervention targeted agricultural households exposed to weather shocks related to changes in rainfall and temperature patterns. It combined a conditional cash transfer with vocational training or a productive investment grant. We identify the relative impact of each complementary package based on randomized assignment, and analyze how impacts vary by exposure to exogenous drought shocks. The results show that both complementary interventions provide full protection against drought shocks two years after the end of the intervention. Households that received the productive investment grant also had higher average consumption levels. The complementary interventions led to diversification of economic activities and better protection from shocks compared to beneficiaries of the basic conditional cash transfer and control households. These results show that combining safety nets with productive interventions can help households manage future weather risks and promote longer-term program impacts.
Keywords: cash transfers; climate change adaptation; diversification; productive investment; risk management; shocks; vocational training
JEL Codes: D1; I3; O1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Complementary interventions (vocational training and productive investment grants) (J24) | smoother consumption and income for beneficiaries (D15) |
| Productive investment grant (E22) | 8% increase in average consumption (D19) |
| Productive investment grant (E22) | 4% increase in income (E25) |
| Interventions (O31) | significant increase in non-agricultural self-employment activities (E69) |
| Productive investment grant (E22) | higher profits from non-agricultural activities (Q19) |