Climate Change and Inclusive Growth in Africa: The Role of Adaptive Capacity

Abstract

This paper examines the climate change effect on inclusive growth and the possible moderating role of adaptive capacity in climate change/inclusive growth in the long and short-run. The study employs temperature change anomalies (with 1951-1980 as the baseline climatological year) and CO2 emissions (metric ton per capita) as variables for climate change and a set of variables as indicators to measure inclusive growth. These set of indicators are adopted from the Asian Development Bank (2014) key indicators for inclusive growth which falls under five broad categories namely: Poverty and inequality; Growth and Expansion of Economic Opportunity; Social Inclusion to Ensure Equal Access to Economic Opportunity; Social Safety Nets; Good Governance and Institutions. Out of this, the study obtains a single variable using Principal Component Analysis (PCA) and fitting the dataset to an Autoregressive Distributed Lag (ARDL) model we determine the long and short-run effects of climate change and adaptive capacity on inclusive growth and the moderating role of adaptive capacity. The studies establish that temperature change anomalies and increases in CO2 emissions lead to a fall in inclusive growth significantly. Thus, climate change has a negative impact on inclusive growth. The study also demonstrates that adaptive capacity contributes to inclusive growth significantly but only in the short-run. However, when the individual component of climate change is considered we observe a significant effect of climate change on mortality rate under 5 (per thousand live births) and contributing family workers (as a percentage of total employment) with adaptive capacity mitigating the negative impact of temperature change anomalies and carbon dioxide in relation to mortality rate. The study, therefore, indicates that climate change negatively affects climate sensitive indicators of inclusive growth and also these sensitive indicators responds appropriately to climate adaptation efforts and strategies.