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Distributional impact analysis of past climate variability in rural Indonesia

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  • Korkeala, Outi
  • Newhouse, David
  • Duarte, Mafalda

Abstract

In rural Indonesia, around 60 percent of workers engage in agriculture and face regular climatic shocks that may threaten their crop production, household income, and human capital investments. Little is known about households’ ability to maintain consumption in response to these shocks. This paper uses both longitudinal and repeated cross-sectional data to examine the extent to which farm profits and household consumption are reduced by delayed monsoon onset, an important determinant of rice production in Indonesia. It also investigates whether poor households are more vulnerable to delayed onset. Overall, delayed onset has minor effects on rural households’ profit and consumption. For poor households, defined as those with average per capita consumption in the lowest quintile, delayed onset the previous year is associated with a 13 percent decline in per capita consumption. Most of this decline is due to an increase in household size, however, and delayed onset two years ago is positively correlated with consumption. The findings suggest that poor households experience greater volatility but no lasting reduction in consumption following delayed monsoon onset.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 5070.

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Date of creation: 01 Oct 2009
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Handle: RePEc:wbk:wbrwps:5070

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Keywords: Rural Poverty Reduction; Small Area Estimation Poverty Mapping; Consumption; Regional Economic Development;

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References

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  1. Cameron, L. & Worswick, C., 1998. "Education Expenditure Responses to Crop Loss in Indonesia: A Gender Bias," Department of Economics - Working Papers Series 636, The University of Melbourne.
  2. Morduch, J., 1995. "Income Smoothing and Consumption Smoothing," Papers 512, Harvard - Institute for International Development.
  3. Kochar, Anjini, 1997. "An empirical investigation of rationing constraints in rural credit markets in India," Journal of Development Economics, Elsevier, vol. 53(2), pages 339-371, August.
  4. Kazianga, Harounan & Udry, Christopher, 2006. "Consumption smoothing? Livestock, insurance and drought in rural Burkina Faso," Journal of Development Economics, Elsevier, vol. 79(2), pages 413-446, April.
  5. Hanan G. Jacoby & Emmanuel Skoufias, 1998. "Testing Theories of Consumption Behavior Using Information on Aggregate Shocks: Income Seasonality and Rainfall in Rural India," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 80(1), pages 1-14.
  6. Elizabeth Frankenberg & James P. Smith & Duncan Thomas, 2004. "Economic Shocks, Wealth and Welfare," Labor and Demography 0403030, EconWPA.
  7. Sharon Maccini & Dean Yang, 2009. "Under the Weather: Health, Schooling, and Economic Consequences of Early-Life Rainfall," American Economic Review, American Economic Association, vol. 99(3), pages 1006-26, June.
  8. Robert M. Townsend, . "Risk and Insurance in Village India," University of Chicago - Population Research Center 91-3a, Chicago - Population Research Center.
  9. David Newhouse, 2005. "The Persistence of Income Shocks: Evidence from Rural Indonesia," Review of Development Economics, Wiley Blackwell, vol. 9(3), pages 415-433, 08.
  10. Walter Falcon & Rosamond Naylor & Whitney Smith & Marshall Burke & Ellen McCullough, 2004. "Using climate models to improve Indonesian food security," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 40(3), pages 355-377.
  11. Stefan Dercon, 2003. "Growth and Shocks: evidence from rural Ethiopia," CSAE Working Paper Series 2003-12, Centre for the Study of African Economies, University of Oxford.
  12. Jacoby, Hanan G & Skoufias, Emmanuel, 1997. "Risk, Financial Markets, and Human Capital in a Developing Country," Review of Economic Studies, Wiley Blackwell, vol. 64(3), pages 311-35, July.
  13. Beegle, Kathleen & Dehejia, Rajeev H. & Gatti, Roberta & Krutikova, Sofya, 2008. "The consequences of child labor : evidence from longitudinal data in rural Tanzania," Policy Research Working Paper Series 4677, The World Bank.
  14. Paxson, Christina H, 1992. "Using Weather Variability to Estimate the Response of Savings to Transitory Income in Thailand," American Economic Review, American Economic Association, vol. 82(1), pages 15-33, March.
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Cited by:
  1. Skoufias, Emmanuel & Essama-Nssah, B. & Katayama, Roy S., 2011. "Too little too late : welfare impacts of rainfall shocks in rural Indonesia," Policy Research Working Paper Series 5615, The World Bank.
  2. World Bank, 2012. "The Welfare Effects of Extreme Weather Events : Insights from Three APEC Case Studies," World Bank Other Operational Studies 13039, The World Bank.

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