Droughts, Biodiversity, and Rural Incomes in the Tropics

Frederik Noack, Marie-Catherine Riekhof and Salvatore Di Falco

Journal of the Association of Environmental and Resource Economists, 2019, vol. 6, issue 4, 823 - 852

Abstract: Poverty and biodiversity are concentrated in rural areas of developing countries where incomes fluctuate with seasons and weather extremes. In this paper, we quantify the income stabilizing role of natural biodiversity and forests for rural households in developing countries. We use panel data covering 7,556 households in 23 developing countries, combined with gridded data on droughts, data on natural biodiversity, and data on the timing of the agricultural cycle. We find that droughts during the growing season reduce crop incomes but that these negative shocks are partly offset by increased incomes from forest extraction. We also find that the negative impact of droughts on rural incomes declines with increasing levels of natural biodiversity. An increase in biodiversity by one standard deviation reduces the impact of droughts on rural production to almost zero. These results therefore stress the importance of biodiversity and natural resources for the stability of rural incomes.

Date: 2019
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