Relationship between adaptation to climate change and provincial government expenditure in Pakistan
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RESEARCH ARTICLE
Relationship between adaptation to climate change and provincial government expenditure in Pakistan Khuda Bakhsh 1
&
Aasma Latif 1 & Rafaqet Ali 1 & Muhammad Asim Yasin 1
Received: 14 July 2020 / Accepted: 6 October 2020 # Springer-Verlag GmbH Germany, part of Springer Nature 2020
Abstract Public expenditures on adaptation to climate change have direct effects on budgets of governments. Such direct impacts on government budgetary allocation have been analyzed in the developed countries and very little research is available considering highly vulnerable and exposed developing countries which are facing huge threats of climate change. The current study is designed to bridge this information gap by examining the effects of climate change adaptation on public expenditures in Pakistan employing provincial level data over the period of 1990–2016. Adaptation expenditures included both overall government expenditures and expenditures on communal amenities and housing. In addition to a fixed effects estimation, we employed long difference model to analyze the impact in the long run. Results indicated that variations in temperature and rainfall were significantly related with public expenditures. Short run and long run scenarios showed that rising temperature caused an increase in public expenditures. The effect of rainfall on total public expenditure was positive and statistically significant while rainfall and expenditure incurred on communal amenities and housing were negatively related in the long run. The study posits important policy implications. Keywords Adaptation . Climate change . Public expenditure . Rainfall . Temperature . Pakistan
Introduction The modern world including developing and developed countries is facing various challenges and climate change is considered among the major environmental challenges (Rahman et al. 2017). Heipertz and Nickel (2008) and Lis and Nickel (2010) report that climate change has direct and indirect impacts on public finance and the impacts can be in the range of 0.2 to 1.4% of GDP. Unterberger (2018) shows that a 1% rising flood damages communal infrastructure and declines annual income by 0.04% in Austria. Nevertheless, the impacts of climate change on human welfare are not same across the globe depending on geographical location, environmental conditions, and financial development. The situation becomes the worst in developing countries where communal Responsible Editor: Philippe Garrigues * Khuda Bakhsh [email protected] 1
Department of Management Sciences, COMSATS University Islamabad, Vehari Campus, Vehari, Pakistan
infrastructure is not well developed. Population of the developing countries in the rain-fed region faces greater threats of climate change (Tschakert 2007). Moreover, limited capability to adaptation and weak or absence of policy on adaptation cause low or no adaptation to climate change in the developing countries (Mertz et al. 2009). Pakistan is highly vulnerable to climate change compared to other developing countries because
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