Relationship between adaptation to climate change and provincial government expenditure in Pakistan

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.