Impacts of ENSO on the Welfare of Rural Residents in China: A Stochastic CGE Model Assessment

ENSO-driven extreme weather events such as droughts and floods can cause significant damage to agricultural production and different intensities of ENSO events make uncertain changes to rural residents’ welfare in different regions. To emphasize this uncertainty, the stochastic CGE model is constructed by imbedding a stochastic parameter into the production module to analyze the impacts of ENSO on the welfare of rural residents in various regions of China and the volatility of uncertain ENSO events on the welfare of residents. The role of agricultural technology in improving welfare stability and transfer payments in reducing welfare losses from ENSO are also examined. The results show that weak ENSO events have little effect on the welfare of rural residents while strong ENSO events cause the welfare of rural residents a significant decline, and the largest decrease appears separately in the southwest region and the smallest one in the northeast. The uncertainty of ENSO events seriously affects the stability of the welfare of the residents, with the average fluctuation level of 200% in the change of the rural residents’ welfare in all regions under El Niño. Technically improving the anti-risk ability of agriculture can effectively reduce the fluctuation of residents’ welfare. Besides, if the government increases the transfer payment to the rural resident for disaster relief, the welfare would increase, and the higher the payment, the greater the improvement of the welfare.