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Discussion Paper Details

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Title: Transfers, Diversification and Household Risk Strategies: Experimental evidence with lessons for climate change adaptation

Author(s): Karen Macours, Patrick Premand and Renos Vakis

Publication Date: April 2012

Keyword(s): cash transfers, climate change adaptation, diversification, productive investment, risk-management, shocks and vocational training

Programme Area(s): Development Economics

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.

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Bibliographic Reference

Macours, K, Premand, P and Vakis, R. 2012. 'Transfers, Diversification and Household Risk Strategies: Experimental evidence with lessons for climate change adaptation'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=8940