Using panel data to estimate the effect of rainfall shocks on smallholders food security and vulnerability in rural Ethiopia

Ethiopia's agriculture is predominantly rainfed and hence any irregularity in weather conditions has adverse welfare implications. Using panel data, this paper analyzes the effect of rainfall shocks on Ethiopian rural households' food security and vulnerability over time while controlling for a range of other factors. To this end, we generated a time-variant household food security index which is developed by principal components analysis. Based on the scores of the index, households were classified into relative food security groups and their socioeconomic differences were assessed. The exploratory results show that compared to the less secured households, the more secured ones have male and literate household heads, tend to have a greater number of economically active household members, own more livestock, experience better rainfall outcome, participate in equb (a local savings group), and use chemical fertilizer. Fixed effects regression was used to identify the factors which affect the score's variability and the results indicate that rainfall shock is an important factor affecting households' food security over time. It is also noted that household size, head's age, participation in equb, off-farm activities, use of fertilizer, and livestock ownership positively and significantly affect the food security score. Results from multinomial logistic regression model reinforce the fixed effects regression results by showing the strong association of persistent food insecurity and vulnerability with adverse rainfall shock. A number of conclusions can be drawn from the results which are useful for policymakers as well as for agencies that engage in areas of risk and food security.