Climate Change Adaptation for Urban Indian Slum Dwellers: A New Economics Research Agenda

 I have been to India once.  In this note, I would like to sketch out a research agenda on the microeconomics of urban slum dweller adaptation to emerging climate risk.  My points will only zero in on India’s specifics a couple of times.  There are many slums throughout the developing world.  I will only focus on the challenge of extreme heat exposure.

My starting point is Robert Townsend’s 1994 Econometrica paper.      His empirics focus on rural India as he tests for whether arrangements take place between farmers to smooth their idiosyncratic income shocks.  Risk averse poor people have an incentive to figure out ways to pool their incomes and then each take an average slice of the pie.   Of course, there are incentives issues that such a contract scheme could introduce moral hazard effects of devoting less costly effort.  

The risk pooling literature is an example of how markets are used to adapt to risk and such implicit markets become even more important if the variance of shocks increase and if people face subsistence utility levels (i.e risk of starving).

The relevant lesson that I take from Rob’s great paper is that when people face risk they seek out adaptation strategies to reduce the risk’s impact on their families. People are not PASSIVE VICTIMS.  So much of the climate change damage literature implicitly assumes that people are naive, passive victims. My 2021 Yale Press Book rejects this logic.  While my book mainly focuses on the United States, I argue that every day we build up more of a capacity to adapt to the punches that Mother Nature throws. In this sense, there is a “great race” taking place. Mother Nature is throwing harder climate punches but we are growing more resilient in handling those punches.   Our increased resilience arises due to human capital, markets and experimentation.

In the case of India’s slums, here is a microeconomic perspective. My discussion slightly dovetails with past Google Scholar papers on the topic. 

1. Are urban slum dwellers aware of the weather patterns that their families face over the course of the day and by season?  Are they aware that the heat is growing worse?  If the answer is “no”, then NGOs can play a key role here with nudging and informing households.

2.  What are the current strategies that slum dwellers have to protect themselves? Using sensors, we need new measurement of how hot it gets in different slum units over the course of the day. Who is home at those times? When is the high heat?   Do people take a Siesta then?

3.  How affordable are market products for slum dwellers?  How much disposable income do these families have to purchase such durables that Amazon sells?

4. Building on #3, are any Indian entrepreneurs designing cheaper adaptation friendly products?  The answer is “yes”.  Induced innovation will deliver an improved menu here.     There is an interesting asymmetry in modern environmental economics.  NBER economists are happy to talk about induced innovation the carbon mitigation case but tend to ignore it in the climate change adaptation case.   The symmetry exists.  See my 2019 paper.

5.  If a representative set of Indian slum dwellers would be willing to wear a health sensor , their blood pressure and other biomarkers could be measured over the course of the day.  Alan Krueger’s work convinces me of the importance of collecting real time indicators of happiness and well being. Patrick Baylis’ work on tweets could be mimicked to further study real time well being dynamics in the hot places.   Of course, health diaries and medication consumption could also be tracked.

6.   In my Climatopolis book, I argued that the American System of Cities protects urbanites.   If one place is suffering, people can move away from it to a more resilient place. In the case of the India’ s slums, do such Tiebout ideas hold? Do any slums have a geographic comparative advantage?  Are there any different architecture designs that reduce slum resident risk?  In the slums that are more climate resilient, can more housing be built there? What is the elasticity of the slum housing supply curve in more resilient places? Are there limits to resilient slum growth?

7.  Do children in slums face long run damage from extreme weather? Where are their schools?  Is their learning impeded by the heat? How do the elderly in slums handle the heat?

8.  Rents are cheap in the slums. This raises a slum dweller’s disposable income.  What do these slum dwellers consume? Does a better diet or better medicines that they can better afford because of their low rents help them to offset the damage caused by extreme heat?

9.  Building on America’s Move to Opportunity, will an ambitious JPAL team offer randomized rental vouchers to India’s slum residents and encourage them to move to less climate impacted areas?  Over the medium term, will children in the treatment group be more likely to achieve their full potential?  

10. Does extreme heat lower slum dweller earnings?  Are they working outside?  Has the boss who hires them figured out how to “beat the heat”?  Given that extreme heat can be predicted, do workers work different shifts of hours to avoid the heat? 

NOTE that I haven’t mentioned government once in this post.  The private sector really drives adaptation. Another way to accelerate adaptation here is if there is a pro-poor politician who wants to make her name boosting resilience. What could she do to “climate proof” a slum? What public goods would enhance resilience and how would she pay for it and who would pay that bill?

How does poverty impeded climate change adaptation and why?  For the non-poor who live in slums, how much better are they at adapting to new risks?

I have only explored extreme heat here. The same questions can be raised about extreme rainfall or other “fat tail” events.   If we anticipate that the we face fat tail risk, is the damage “fat tail”?  My simple answer is “no”.