Climate change is raising groundwater salinity across coastal regions, threatening smallholder livelihoods. In Bangladesh, a common adaptation is to convert rice paddies into saltwater shrimp ponds — a technology that thrives where rice cannot. We ask whether this private adaptation generates negative externalities on neighbouring rice farmers, and how this affects the adoption of the technology. Combining a novel household survey with a satellite panel covering roughly 80,000 plots over 27 seasons, we document a sharp salinity gradient at the shrimp–rice boundary: bordering rice plots show 21% higher salinity and 7% lower yields than otherwise comparable plots. Event-study estimates show that a neighbour's conversion raises own-conversion likelihood and depresses vegetation indices on remaining agricultural plots. Conversions are nearly irreversible, and marginal adopters show lower profits than pre-adoption, suggesting climate resilience for some can erode it for others.

International Growth Centre (IGC), STICERD, Hub for Equal Representation

Development Innovation Ventures

International Growth Centre (IGC), JPAL-KCAI

JPAL-KCAI, Gates Foundation

The bulk of the world's extreme poor work in subsistence agriculture. Diversification out of this activity is often seen as the sine qua non of economic development. We evaluate whether the roll-out of a mainstay development intervention—microfinance—into poor, agricultural and largely unbanked populations in rural Uganda helps borrowers to diversify into non-agricultural labour activities. The new microfinance product is targeted to women, and differs from existing sources of formal and informal credit in that it allows them to borrow larger amounts but has inflexible repayment dates and the use of funds is monitored. We find that the arrival of microfinance enables women to diversify out of agriculture and into service-based activities such as small-scale trading. This low-level structural change, however, is not transformative in that it does not lead—at least after two years—to significant uplifts in earnings, consumption, savings, investment and overall wealth.