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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. Stefan Dercon, 2003. "Growth and Shocks: evidence from rural Ethiopia," Economics Series Working Papers WPS/2003-12, University of Oxford, Department of Economics.
  2. Elizabeth Frankenberg & James P. Smith & Duncan Thomas, 2003. "Economic Shocks, Wealth, and Welfare," Journal of Human Resources, University of Wisconsin Press, vol. 38(2).
  3. 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, Agricultural and Applied Economics Association, vol. 80(1), pages 1-14.
  4. Morduch, J., 1995. "Income Smoothing and Consumption Smoothing," Papers, Harvard - Institute for International Development 512, Harvard - Institute for International Development.
  5. 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, Taylor & Francis Journals, vol. 40(3), pages 355-377.
  6. Paxson, Christina H, 1992. "Using Weather Variability to Estimate the Response of Savings to Transitory Income in Thailand," American Economic Review, American Economic Association, American Economic Association, vol. 82(1), pages 15-33, March.
  7. Jacoby, Hanan G & Skoufias, Emmanuel, 1997. "Risk, Financial Markets, and Human Capital in a Developing Country," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 64(3), pages 311-35, July.
  8. Robert M. Townsend, . "Risk and Insurance in Village India," University of Chicago - Population Research Center, Chicago - Population Research Center 91-3a, Chicago - Population Research Center.
  9. Sharon L. Maccini & Dean Yang, 2008. "Under the Weather: Health, Schooling, and Economic Consequences of Early-Life Rainfall," NBER Working Papers 14031, National Bureau of Economic Research, Inc.
  10. Cameron, Lisa A & Worswick, Christopher, 2001. "Education Expenditure Responses to Crop Loss in Indonesia: A Gender Bias," Economic Development and Cultural Change, University of Chicago Press, vol. 49(2), pages 351-63, January.
  11. Kazianga, Harounan & Udry, Christopher, 2006. "Consumption smoothing? Livestock, insurance and drought in rural Burkina Faso," Journal of Development Economics, Elsevier, Elsevier, vol. 79(2), pages 413-446, April.
  12. Kochar, Anjini, 1997. "An empirical investigation of rationing constraints in rural credit markets in India," Journal of Development Economics, Elsevier, Elsevier, vol. 53(2), pages 339-371, August.
  13. David Newhouse, 2005. "The Persistence of Income Shocks: Evidence from Rural Indonesia," Review of Development Economics, Wiley Blackwell, Wiley Blackwell, vol. 9(3), pages 415-433, 08.
  14. 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.
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Cited by:
  1. Emmanuel Skoufias & Roy S. Katayama & B. Essama-Nssah, 2012. "Too little too late: welfare impacts of rainfall shocks in rural Indonesia," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, Taylor & Francis Journals, vol. 48(3), pages 351-368, December.
  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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