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Distributional impact analysis of past climate variability in rural Indonesia

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

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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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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  1. 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.
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  5. 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.
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  9. 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.
  10. 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.
  11. 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.
  12. 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.
  13. 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.
  14. 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.
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