Climate change is raising groundwater salinity across coastal regions globally, threatening smallholder livelihoods. In Bangladesh, a common adaptation is to convert freshwater rice paddies into saltwater shrimp ponds. However, this adaptation comes with an externality: saltwater from shrimp ponds may spread into neighboring fields, damaging rice. We ask whether this private adaptation generates negative externalities on neighboring rice farmers and whether those externalities accelerate further adoption. Combining a novel household survey with a satellite panel of 73,300 plots over nine years, we document that a neighbor’s conversion lowers vegetation on adjacent rice plots and raises the probability that those plots convert by 32.6 percentage points. Interpreted through a model of land use based on comparative advantage and a boundary externality, these results imply an adaptation cascade: 79 percent of ponds exist only because a neighbor converted, and a tax on conversion would raise aggregate farm profit by 16 percent. Private decisions that promote climate resilience for some can erode it for others.

International Growth Centre (IGC), STICERD, Hub for Equal Representation

Global warming will cause adverse changes to the climate faced by the world’s poorest. Individuals can mitigate the impacts of these shocks by adopting new technologies, working in less-exposed occupations, or migrating to safer areas. However, it is unclear whether exposed populations are sufficiently informed about future shocks to undertake these investments. We use a survey experiment (N=5,992) among a large sample of rural Bangladeshis to show that concerns about climate change are widespread; that individuals plan to invest in new technologies in-situ (rather than migration and occupation change); and that a large flood is associated with stronger demand for in-situ adaptation policies. Providing information about future shocks does not affect adaptation intentions or policy demand. Overall, the rural poor are highly concerned about climate change and would like vigorous investments in in-situ adaptation. Alternative policies aiming to support migration or occupation need to raise beneficiary interest to be effective.

International Growth Centre (IGC), JPAL-KCAI

Do the poor have high returns from trainable human capital? Can they afford to pay for it? And are they differentially targeted by the organizations that offer training? We provide unique evidence on these questions by combining a household census (N=42,895) in urban Bangladesh, a randomized controlled trial of an on-the-job training intervention, unique data on the targeting of the implementing partner, and a structural model. We find that take-up of the training at full price is minimal, and there are no effects on labor market outcomes. The poor, however, increase employment and consumption under a 70% discount. We also document that, for the same program, the implementing NGO would have selected richer beneficiaries who are more likely to enroll in training. Our structural model rationalizes these findings by estimating that the poor have higher-than-average returns to training, but they also experience higher participation costs, and are hence targeted less frequently by an implementer that wants to maximise take-up. We confirm the central finding that the poor have higher-than-average returns to training in a re-analysis of previous training experiments, using machine learning predictions of outcomes and treatment effects.

Development Innovation Ventures

JPAL-KCAI, Gates Foundation

The bulk of the world's extreme poor work in subsistence agriculture. Diversification out of this activity is often seen as the sine qua non of economic development. We evaluate whether the roll-out of a mainstay development intervention—microfinance—into poor, agricultural and largely unbanked populations in rural Uganda helps borrowers to diversify into non-agricultural labour activities. The new microfinance product is targeted to women, and differs from existing sources of formal and informal credit in that it allows them to borrow larger amounts but has inflexible repayment dates and the use of funds is monitored. We find that the arrival of microfinance enables women to diversify out of agriculture and into service-based activities such as small-scale trading. This low-level structural change, however, is not transformative in that it does not lead—at least after two years—to significant uplifts in earnings, consumption, savings, investment and overall wealth.