Cash Transfer Programmes for Managing Climate Risk: Evidence from a Randomized Experiment in Zambia

Abstract

Cash transfer programmes are increasingly being utilized in order to combat poverty and hunger as well as to building the human capital of future generations. Even though most of these programmes are not explicitly designed to help households manage climate risk, there are good reasons to expect that cash transfers can be good instrument to build household resilience against climatic risk. The goal of this study is to provide an empirical analysis of the effect of weather risk on rural households’ welfare using impact evaluation data from the Zambia Child Grant Programme (CGP) together with set of novel weather variation indicators based on interpolated gridded and re-analysis weather data that capture the peculiar features of short term and long term variations in rainfall. In particular, we estimate the impact of weather shocks on a rich set of welfare and food security indicators (including total expenditure, food expenditure, non-food expenditure, calorie intake and dietary diversity) and investigate the role of cash transfer for managing climate risk. We find strong evidence that cash transfer programmes has a mitigating role against the negative effects of weather shocks. Our results in fact highlight how important the receipt of social cash transfer is for households lying in the bottom quantile of consumption and food security distributions in moderating the negative effect of weather shock. Hence, integrating climate change and social protection tools into a comprehensive poverty reduction and social protection strategy should be of primary interest for policy makers and government when setting their policy agenda.