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Transfers, diversification and household risk strategies : experimental evidence with lessons for climate change adaptation
 
Author:Macours, Karen; Premand, Patrick; Vakis, Renos; Collection Title:Policy Research working paper ; no. WPS 6053
Country:World; Date Stored:2012/04/24
Document Date:2012/04/01Document Type:Policy Research Working Paper
SubTopics:Regional Economic Development; Rural Poverty Reduction; Housing & Human Habitats; Safety Nets and TransfersLanguage:English
Region:The World RegionReport Number:WPS6053
Volume No:1 of 1  

Summary: 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. The authors 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.

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