Essays on economics of adaptation to climate change

This PhD thesis consists of three essays in environmental economics, with focus on the adaptation to climate change. The first work provides a multi-country, comparative analysis of how income and climate drive air-conditioning adoption in four developing economies. We show that the decision to purchase air-conditioning in response to warmer climatic conditions is strongly anchored to a household’s socio-economic conditions. Moreover, although the penetration of air-conditioning is expected to increase in the future, millions of less well-off electrified households that need but cannot obtain air conditioners will remain. The second paper tests whether remittances can relax such credit constraints to facilitate the heat adaptation process in emerging economies. We rely on household data from 2008 to 2018 for Mexico, and an instrumental variable approach for dealing with the potential endogeneity of remittance income. We find that remittance income plays a key role in the adaptation process, particularly for families living in the coastal areas, and with low-income. We conclude computing the potential private benefits of this form of adaptation. The third paper examines the effectiveness of alternative cooling technologies in mitigating mortality impacts from extreme heat in India. To do so, we combine rich longitudinal household data with district-level mortality data and high-resolution meteorological information. We employ micro-panel fixed-effects regression to identify the effect of temperature as quasi-random assigned. Our empirical results highlight a critical trade-off in heat adaptation. While we find that the expensive air-conditioning proves to be highly effective in reducing temperature-related mortality, its ownership and use remains low, predominantly limited to high-income cities. In contrast, many Indian households, including low-income ones, purchase cheaper coolers, which we find offering substantially reduced protection against heat stress. This has important implications in terms of number of lives saved, economic benefits, and adaptation policies.