Adapting to Climate Risk With Guaranteed Credit: Evidence From Bangladesh

Gregory Lane

doi:10.3982/ecta19127

journal article Open Access Jan 01, 2024

Adapting to Climate Risk With Guaranteed Credit: Evidence From Bangladesh

Gregory Lane

Econometrica Vol. 92 No. 2 pp. 355-386 · JSTOR

View at Publisher Save 10.3982/ecta19127

Abstract

Climate change is increasing the frequency of extreme weather events, with low‐income countries being disproportionately impacted. However, these countries often face market frictions that hinder their ability to adopt effective adaptation strategies. In this paper, I explore the role of credit market failures in limiting adaptation. To achieve this, I collaborate with a large microfinance institution and offer a randomly selected group of farmers access to guaranteed credit through an “Emergency Loan” following a negative climate shock. I document three key results. First, farmers who have access to the emergency loan make less costly adaptation choices and are less severely affected when a flood occurs. Second, I find no evidence of adverse spillover effects on households that did not receive the Emergency Loan. Finally, I demonstrate that providing the Emergency Loan is profitable for the microfinance institution, making it a viable tool for the private sector to employ in similar circumstances.

Topics

No keywords indexed for this article. Browse by subject →

References

59

[1]

Angelucci American Economic Journal: Applied Economics (2015)

[2]

Aragón Journal of Development Economics (2020) 10.1016/j.jdeveco.2020.102497

[3]

Banerjee American Economic Journal: Applied Economics (2015)

[4]

Banerjee American Economic Journal: Applied Economics (2015)

[5]

Barboni Journal of Economic Behavior & Organization (2017) 10.1016/j.jebo.2017.07.020

[6]

Barboni, Giorgia, and Parul Agarwal (2022): “How Do Flexible Microfinance Contracts Improve Repayment Rates and Business Outcomes? Experimental Evidence From India,” Working Paper. 10.2139/ssrn.4358795

[7]

Adapting to Climate Change: The Remarkable Decline in the US Temperature-Mortality Relationship over the Twentieth Century

Alan Barreca, Karen Clay, Olivier Deschenes et al.

Journal of Political Economy 2016 10.1086/684582

[8]

Battaglia, Marianna, Selim Gulesci, and Andreas Madestam (2023): “Repayment Flexibility and Risk Taking: Experimental Evidence From Credit Contracts,” The Review of Economic Studies, rdad107. 10.1093/restud/rdad107

[9]

Beaman Econometrica (2023) 10.3982/ecta18916

[10]

BRAC Data Center (2018): “Loans Database,” Unpublished Data. Accessed April 30, 2018.

[11]

Brammer The Geographical Journal (1990) 10.2307/635431

[12]

Brooks Econometrica (2020) 10.3982/ecta15828

[13]

Brouwer Risk Analysis (2007) 10.1111/j.1539-6924.2007.00884.x

[14]

Burgess, Robin, Olivier Deschenes, Dave Donaldson, and Michael Greenstone (2017): “Weather, Climate Change and Death in India,” Working Paper.

[15]

Burke The Quarterly Journal of Economics (2018) 10.1093/qje/qjy034

[16]

Carleton, Tamma, Amir Jina, Michael Delgado, Michael Greenstone, Trevor Houser, Solomon Hsiang, Andrew Hultgren, Robert E. Kopp, Kelly E. McCusker, Ishan Nath, James Rising, Ashwin Rode, Hee Kwon Seo, Arvid Viaene, Jiacan Yuan, and Alice Tianbo Zhang (2022): “Valuing the Global Mortality Consequences of Climate Change Accounting for Adaptation Costs and Benefits,” The Quarterly Journal of Economics Qjac020. 10.1093/qje/qjac020

[17]

Social and economic impacts of climate

Tamma A. Carleton, Solomon M. Hsiang

Science 2016 10.1126/science.aad9837

[18]

Time versus State in Insurance: Experimental Evidence from Contract Farming in Kenya

Lorenzo Casaburi, Jack Willis

American Economic Review 2018 10.1257/aer.20171526

[19]

Chirakijja, Janjala, Seema Jayachandran, and Pinchuan Ong (2021): “Inexpensive Heating Reduces Winter Mortality,” Monash Econometrics and Business Statistics Working Papers Number: 9/21 Publisher: Monash University, Department of Econometrics and Business Statistics.

[20]

Clarke American Economic Journal: Microeconomics (2016)

[21]

Cole American Economic Journal: Applied Economics (2013)

[22]

Cole Annual Review of Economics (2017) 10.1146/annurev-economics-080315-015225

[23]

Conning (2007)

[24]

Crépon American Economic Journal: Applied Economics (2015)

[25]

Dar, Manzoor H., Alain de Janvry, Kyle Emerick, Erin M. Kelley, and Elisabeth Sadoulet (2022): “Casting a Wider Net: Sharing Information Beyond Social Networks,” CEGA Working Paper No. 149.

[26]

Dar, Manzoor H., Kyle Emerick, Elisabeth Sadoulet, Alain de Janvry, and Eleanor Wiseman (forthcoming): “Private Input Suppliers as Information Agents for Technology Adoption in Agriculture,” American Economic Journal: Applied.

[27]

Deaton Econometrica (1991) 10.2307/2938366

[28]

Deaton Scandinavian Journal of Economics (1992) 10.2307/3440451

[29]

Demont, Timothée (2014): “Microcredit as Insurance: Evidence From Indian Self-Help Groups,” Tech. Rep. 1410, University of Namur, Department of Economics.

[30]

Donovan The Review of Economic Studies (2020) 10.1093/restud/rdaa084

[31]

Elabed Agricultural Economics (2013) 10.1111/agec.12025

[32]

Emerick American Economic Review (2016) 10.1257/aer.20150474

[33]

FAO (2021): “The Impact of Disasters and Crises on Agriculture and Food Security: 2021”.

[34]

Few Progress in Development Studies (2003) 10.1191/1464993403ps049ra

[35]

Field Journal of the European Economic Association (2010) 10.1162/jeea.2008.6.2-3.501

[36]

Does the Classic Microfinance Model Discourage Entrepreneurship Among the Poor? Experimental Evidence from India

Erica Field, Rohini Pande, John Papp et al.

American Economic Review 2013 10.1257/aer.103.6.2196

[37]

Seasonal Liquidity, Rural Labor Markets, and Agricultural Production

Günther Fink, B. Kelsey Jack, Felix Masiye

American Economic Review 2020 10.1257/aer.20180607

[38]

Fishman Journal of Development Economics (2023) 10.1016/j.jdeveco.2023.103051

[39]

Guiteras American Economic Review: Papers and Proceedings (2015) 10.1257/aer.p20151095

[40]

Haque International Journal of Disaster Risk Reduction (2022) 10.1016/j.ijdrr.2022.102861

[41]

Hill Journal of Development Economics (2019) 10.1016/j.jdeveco.2018.09.003

[42]

Hsiang, Solomon M., and Amir S. Jina (2020): “The Causal Effect of Environmental Catastrophe on Long-Run Economic Growth: Evidence From 6700 Cyclones,” Working Paper 20352, National Bureau of Economic Research.

[43]

(2021)

[44]

Jones American Economic Review (2022) 10.1257/aer.20210059

[45]

Microcredit in Theory and Practice: Using Randomized Credit Scoring for Impact Evaluation

Dean Karlan, Jonathan Zinman

Science 2011 10.1126/science.1200138

[46]

Karlan The Review of Economic Studies (2018) 10.1093/restud/rdy046

[47]

Agricultural Decisions after Relaxing Credit and Risk Constraints *

Dean Karlan, Robert Osei, Isaac Osei-Akoto et al.

The Quarterly Journal of Economics 2014 10.1093/qje/qju002

[48]

Labie Oxford Development Studies (2017) 10.1080/13600818.2016.1239701

[49]

Lane, Gregory (2023): “Adapting to Climate Risk With Guaranteed Credit: Evidence From Bangladesh,” https://papers.ssrn.com/abstract=4700463. 10.2139/ssrn.4700463

[50]

Lobell Nature Food (2020) 10.1038/s43016-020-00165-w

Showing 50 of 59 references

Cited By

36

Flood disasters, firm total factor productivity and adaptation behaviors

Peiting Dong, Xin Yao · 2025

China Economic Review

Metrics

36

Citations

59

References

Details

Published: Jan 01, 2024
Vol/Issue: 92(2)
Pages: 355-386
License: View

Authors

G

Gregory Lane

Harris School of Public Policy, University of Chicago; NBER

Funding

Benelux Association for Stable Isotope Scientists

Cite This Article

Gregory Lane (2024). Adapting to Climate Risk With Guaranteed Credit: Evidence From Bangladesh. Econometrica, 92(2), 355-386. https://doi.org/10.3982/ecta19127

Adapting to Climate Risk With Guaranteed Credit: Evidence From Bangladesh

You May Also Like