Most decisions involving risk are not taken in isolation. In addition to the risk from that decision, other independent, so-called ‘background’ risks, are considered. Our research adds to the growing evidence that this background risk influences risk-taking. We report results from a repeated lab-in-the-field investment task with Senegalese fishers in the presence of background risk related to their fishing income and their health. Our measure of background risk is the monthly wind condition. Without controls, we find that fishers act on average intemperately. Adding controls, we find that the impact of background risk on risk-taking—measured as the investment in the investment task—depends on the boat size of the fishers. When dividing the sample according to wealth, we find temperate behavior for the relatively poorer group and intemperate behavior that depends on boat lengths for the relatively richer group. Our results show the interrelations between background risk and context factors.

This study aims to understand how Rwandan farmers value the improved characteristics of climate services introduced to them in a choice experiment setting. Data were collected from 1,525 household heads in November 2019. A random parameters logit model was used to analyze the data. Results suggest that Rwandan farmers value forecast accuracy, dissemination through a combination of extension agents and the Participatory Integrated Climate Services for Agriculture process, and bundling with market price information. This study suggests that to improve agricultural management planning and food security of farmers through the provision of climate services, these services need to be accurate, user-tailored, and accessible.

This paper combines population and climate data to estimate the volume of migration induced by the drought events that have hit Mali since the late 1980s. The results show that droughts have had the effect of decreasing net migration rates in the affected localities. This is true for both men and women, regardless of their age. The effect of drought episodes, however, is found to differ according to localities and households’ capacity to adapt to climatic constraints: it fades in localities characterized by more diversified crops and in areas that receive more rainfall on average. Climate shocks also had an impact on international mobility: over the 2004–2009 period, around 2300 additional departures per year can be attributed to the droughts that hit Mali during the 2000s. We forecast that, under different climate scenarios and population growth projections, mobility induced by drought events will substantially grow in the next decades.

We propose a model of international oligopoly with two countries, two vertically-differentiated goods, and heterogeneous consumers in terms of their willingness to pay for quality. Various sources of pollution are taken into account: consumption, production and the transportation of goods between the two countries. Green persuaded consumers display consumption home bias: they derive additional satisfaction when consuming a domestic good because buying locally abates transportation pollution. We investigate whether consumption home bias effectively curbs global emissions. Finally, we uncover the environmental role played by the globalization of markets.

Climate change is increasing the frequency of extreme weather events, such as drought and heat waves. In this paper, we assess the impact of drought and high temperatures on the employment outcomes of working-age individuals in South Africa between 2008 and 2017. We merge high-resolution weather data with detailed individual-level survey data on labor market outcomes, and estimate causal impacts using a fixed effects framework. We find that increases in the occurrence of drought reduce overall employment. These effects are concentrated in the tertiary sector, amongst informal workers, and in provinces with a higher reliance on tourism. Taken together, our results suggest that the impacts of climate change will be felt unequally by South Africa's workers.

Nigeria is endowed with abundant sunshine year-round; thus, solar PV would solve the environmental problems associated with petrol-powered generators. However, it is unclear whether households are willing to transition. Thus, we analyze households’ willingness to pay (WTP) for solar PV under four scenarios: (i) WTP when a solar PV is complemented with a generator, (ii) WTP when a solar PV completely displaces a generator, (iii) WTP when a solar PV is complemented with a generator, plus a subsidy, and (iv) WTP when a solar PV completely displaces a generator, given a subsidy. We find that WTP for solar PV is higher when it can displace generators completely. Subsidy plus monthly rather than upfront payment would scale up the adoption of solar PV by about 6 per cent. Furthermore, the cost benefit analysis results show that solar PV investment is profitable. Thus, there is a need to implement policies aimed at scaling up the energy transition.

Long-term exposure to extreme temperatures could threaten individuals' mental health and psychological wellbeing. This study aims to investigate the long-term impact of cumulative exposure to extreme temperature. Differently from existing literature, we define extreme temperature exposure in relative terms based on local temperature patterns. Combining the China Health and Retirement Longitudinal Study and environmental data from the U.S. National Oceanic and Atmospheric Administration from 2011 to 2015, this study demonstrates that heat and cold exposure days in the past year significantly increase the measured depression level of adults over age 45 by 1.75 and 3.00 per cent, respectively, controlling for the city, year, and individual fixed effects. The effect is heterogeneous across three components of depression symptoms as well as age, gender, and areas of residency, and air conditioning and heating equipment are effective in alleviating the adverse impact of heat and cold exposure. The estimation is robust and consistent across a variety of temperature measurements and model modifications. Our findings provide evidence on the long-term and accumulative cost of extreme temperature to middle-aged and elderly human capital, contributing to the understanding of the social cost of climate change and the consequent health inequality.

This paper investigates whether pollution-intensive industries develop faster in a time of economic downturn. Using firm-level panel data from 2005 to 2013, we find supporting empirical results in an analysis of China's manufacturing industries in the 2008 economic crisis. We find that pollution-intensive firms tended to produce more compared with non-pollution-intensive firms in the 2008 economic crisis, with the pre-crisis period as a baseline. We further find that this effect is more pronounced in areas with higher export dependence and a smaller proportion of production from pollution-intensive industries. The relatively faster production expansion in pollution-intensive industries is more evident for state-owned enterprises.

The vulnerability of small firms to price shocks may partly explain why fossil fuel subsidy removals in developing countries are so difficult to implement. This paper analyzes the effects of fuel and electricity price increases on profits of micro- and small-sized enterprises in Mexico. Using representative cross-sectional data, simulations of profit losses hint at potentially large short-term effects. First-order profit losses of a 1 per cent price increase are 0.2 per cent for fuels and 0.07 per cent for electricity, but are higher than 1 per cent for fuels in the transport sector. These effects are larger for formal than for informal firms, with energy-using low-profit firms being most vulnerable. Second-order impacts – predicted using estimated input-demand elasticities – indicate that firms react to price shocks by substituting labor for energy, while the self-employed appear to increase their own labor input. Reduced-form regressions show that some firms pass on higher fuel costs to customers.

This paper studies the effects of drought shocks in a vulnerable environment – the Brazilian Semi-Arid. We analyze the impact of drought shocks, measured as deviations from long-run historical averages, on agricultural outcomes in a region that suffers recurrently from drought. After controlling for municipality and year fixed effects, we use weather shocks to exactly identify outcomes. Our benchmark results show substantial effects on the loss of crop area and on the value of agricultural output, as well as on crop yields. As we investigate distributional effects, our results show that crops related to familiar agriculture suffer more from drought shocks. We follow our investigation by testing heterogeneity effects and show that adequate water provision and maintenance of forest cover help in reducing the impact of drought shocks.