Improving incentives for adaptation: Experimental evidence from Odisha

As climate change increases the frequency of natural disasters, governments must weigh how best to promote adaptation while delivering effective relief. In flood-prone Odisha, India, the researchers will conduct a randomized controlled trial to assess the extent to which farmers’ adaptive investments are curtailed by liquidity constraints and disincentivized by expectations of government aid. Leveraging flood risk data from Fathom Global, the researchers will stratify villages by long-run flood exposure and use a novel incentive-compatible mechanism to estimate willingness to pay for each policy and uncover heterogeneity by risk level and behavioral traits. Working with the State Government of Odisha, the findings will inform cost-effective, targeted disaster responses in settings with constrained resources and weak credit markets, generating both immediate policy insights and broader academic insights on climate adaptation, aid disincentives, and the investment behavior of poor farmers.

“Increasing resilience to flooding in low-income countries is critical for climate adaptation. In this project, we experimentally test whether a lack of liquidity and/or promises of government aid in the event of a flood deter private climate adaptation.”

Fiona Burlig, Assistant Professor, Harris School of Public Policy at the University of Chicago