Dealing with Climate Change: Household Risk Management and Adaptation in Latin America

Abstract

Climate change is expected to increase weather variability and produce structural transformations in climate. Both effects pose a serious challenge to social and economic systems, in particular for agrarian economies in developing countries and the rural poor. With a focus on Latin America, this paper identifies these geographical and socio-economic vulnerabilities and synthesizes the evidence on the risk management and coping strategies of rural households to argue that they have a limited capacity to fully and efficiently deal with weather-related risks and shocks and engage in optimal economic transitions. We claim that these limitations are expected to have negative short- and long-run consequences on the well-being of rural populations. Agricultural incomes and, thus, food, basic non-food consumption and investments in human capital, health, nutrition and productive physical assets are likely to be negatively affected in the context of climate change. We discuss the main implications for policy aimed at protecting the welfare of the most vulnerable groups in the region. The primary goals of these policies are: (a) to enable households to handle risk and shocks effectively, (b) to increase households' economic mobility and effective adaptation and, (c) to address emerging public health concerns.

Keywords: climate change, risk-management, human development

JEL Classification: D10, I10, O10