Abstract

We examine the link between extreme weather events and national aid and transfers at the municipal level in the Philippines between 1992 and 2015. Using local-level data of public income and expenditures, local precipitation, poverty incidence, and satellite-based night light luminosity, we find that the national government seems to exhibit strategic behavior by allocating more national aid and transfers during dry spells, in which damage is significantly higher and more prolonged compared to periods of higher-than-usual precipitation. Notwithstanding, the amount of national aid and transfers in these events were very small at about $2 per capita per affected municipality, suggesting that the lack of effectiveness of aid and transfers could be the result of a lack of capacity rather than poor government allocation of public funds.

Highlights

  • Climate change impacts the hydrological cycle causing disruptions in the amount, frequency, and intensity of precipitation ranging from intense droughts to torrential rains

  • Before we determine how effective national aid and transfers are in influencing the recovery process of disaster-stricken areas, it is important to first identify the determinants of internal revenue allotment and national aid and extraordinary transfers

  • We run a simple regression of log-transformed internal revenue allotment (IRA) and aid and transfers on the dummies of precipitation levels, along with other potentially significant explanatory variables

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Summary

Introduction

Climate change impacts the hydrological cycle causing disruptions in the amount, frequency, and intensity of precipitation ranging from intense droughts to torrential rains. These two extremes in precipitation threaten a number of economic activities and may cause humanitarian crises, for example food insecurity and poverty, in areas reliant on agriculture. Certain local areas in the Philippines, mostly in the north, are more often visited by typhoons and hurricanes, while other areas (mostly in the south) experienced more pronounced droughts than others This heterogeneity in exposure to extreme precipitation among local areas necessitates analyses of impacts at the local level. Most of the studies have been done either in a cross-country setting using aggregate outcome variables or in the context of large damage, which poses some concerns on the generalizability of the results, at the local level.

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