CLIMATE SHOCKS AND RESILIENCE: EVIDENCE FROM RURAL ETHIOPIA

Birhan S. Tesfahun, A. Kasie, Joanna B. Upton and Sylvia A. Blom

No 321060, PRCI Research Papers from Michigan State University, Department of Agricultural, Food and Resource Economics, Food Security Group

Abstract: Climate shock, specifically drought causes serious adverse effects on household welfare in rural Ethiopia. As a direct response to such shocks, resilience and related activities become the country’s key development agenda. In this context, we examine the relationship between climate shock and household consumption and then assess how household resilience influences this relationship. By combining historical observations of climate extremes and Ethiopian Socioeconomic survey datasets, we find that both short-term and long-term droughts are significantly associated with reduced consumption, and this relationship is moderated by resilience. We look at the resilience indicators that possibly mediate the effects of drought on either realized or probabilistic measures of consumption to understand what is associated with the ability to withstand or recover quickly from drought. We reframe the resilience as capacity approach and resilience as a normative condition approach that reflect two distinct ways of inferring resilience. In the resilience as capacity approach, we model realized consumption as a dependent variable and interaction terms between drought and hypothesized resilience indicators as joint explanatory variables. From our hypothesized resilience indicators, we find some indicators that are associated with attenuating the adverse effects of drought shock on realized household consumption. These include wealth index, informal transfer, and formal transfer indicators. In the resilience as a normative condition approach, we model probabilistic household consumption as a dependent variable and same interaction terms and find income diversification, livestock diversification, and agricultural asset indicators. This study has important implications for both research and policy. The adverse effects of droughts on consumption inform the investment need and policy design around resilience. The resilience indicators associated with attenuating the adverse effects of drought shock on realized and probabilistic consumption has also important implications. First, the nexus between drought and consumption via specific resilience indicators associated with attenuating the adverse effect of drought on consumption informs policy design around these indicators. Second, our interest variable framing to identify the specific resilience indicators associated with attenuating the adverse effects of drought on both realized and probabilistic household consumption provides insight to bridge the resilience as capacity and resilience as a normative condition approaches classic debate with the question of whether resilience is a right-hand or left-hand side variable

Keywords: Consumer/Household Economics; Environmental Economics and Policy (search for similar items in EconPapers)
Pages: 26
Date: 2021-10-01
New Economics Papers: this item is included in nep-agr, nep-dev, nep-env and nep-pke
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Persistent link: https://EconPapers.repec.org/RePEc:ags:miprrp:321060

DOI: 10.22004/ag.econ.321060

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