1 Introduction and Problem Statement
Today there is a broad consensus on the anthropogenic involvement in climate change. The connection between human activity related green house gas emissions and their impacts on temperature and precipitation regimes has been subject of numerous studies. There seems to be enough evidence that changing climatic patterns will impact on economic well-being (DESCHENES AND GREENSTONE, 2007). Harmful effects of climate change are expected worldwide. However, especially to developing countries it poses a far more serious threat as many of their environmental and developmental problems are at risk of being exacerbated (UNFCCC, 2007; CLINE, 2007; MENDELSOHN AND WILLIAMS, 2004). Moreover, developing countries heavily rely on climate sensitive sectors to generate income, most importantly the agricultural sector. Labor in developing countries is highly abundant and relatively inexpensive, thus the economy mainly relies on labor intensive technologies, leaving less room for advanced adaptation options (MENDELSOHN et al., 2001). From a physiographic perspective developing countries located in tropical regions usually have a large share of soils that are unsuitable for agricultural purposes; this additionally increases their vulnerability to potential damage from environmental changes (MENDELSOHN AND DINAR, 1999). Pakistan, situated in the South Asian region between 24-37°N of latitude and 61- 76°E of longitude, with agriculture as its mainstay and responsible for almost 70% of the livelihoods of the population, directly or indirectly linked to the sector and home to a population of approximately 170 million with 32% living below the poverty line, is one such developing country with a high vulnerability towards...
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