Abstract
This paper examines the optimal adaptation policy of Small Island Developing States (SIDS) to cope with climate change. We build a dynamic optimization problem to incorporate the following ingredients: (i) local production uses labor and natural capital, which is degraded as a result of climate change; (ii) governments have two main policy options: control migration and/or conventional adaptation measures ; (iii) migration decisions drive changes in the population size; (iv) expatriates send remittances back home. We show that the optimal policy depends on the interplay between the two policy instruments that can be either complements or substitutes depending on the individual characteristics and initial conditions. Using a numerical analysis based on the calibration of the model for different SIDS, we identify that only large islands use the two tools from the beginning, while for the smaller countries, there is a substitution between migration and conventional adaption at the initial period