The Impacts of Climate Change on Farmers and Indigenous Peoples’ Consumption: Evidence from Panama

Climate change is a significant challenge faced by tropical developing countries. While efforts have been made to support vulnerable socio-economic groups such as farmers and indigenous peoples, little is known about how climate change affects these groups. This paper provides empirical evidence by estimating the impact of weather shocks (high temperature, temperature shock, and flood) on households' total consumption and its components (food and non-food consumption) in Panama. The study aims to explore the heterogeneity of weather shocks' impacts, specifically between households of indigenous and non-indigenous peoples, and farmers and non-farmers, thus contributing to the literature on the effects of belonging to a minority and indigenous group when facing climate change impacts. By combining repeated cross-sectional data from surveys on 17,650 households with gridded climate data and flood events information for the years 1997, 2003, and 2008, the study examines if there are differences in the negative impact due to weather shocks between farmers and non-farmers or indigenous and non-indigenous households. The main findings are as follows: Firstly, higher temperature, temperature shock, and flood reduce consumption and their negative impact on food consumption is smaller than non-food consumption. Secondly, there are significant differences in the negative impact of heavy rain shocks between farmers and non-farmers. Furthermore, there are significant differences in the negative impact of weather shocks (higher temperature, temperature shock, and flood) on non-food consumption between indigenous and non-indigenous households, while there is no significant difference in total consumption and food consumption. Thirdly, the negative impacts of weather shocks on the consumption of poor households are less than those on the consumption of non-poor households. Hence, indigenous households are more vulnerable to climate change than farmers and poor households.