Drought Shocks and Labor Reallocation in Rural Ethiopia

Arnold L. Musungu, Zaneta Kubik and Matin Qaim

No 365917, 2023 Seventh AAAE/60th AEASA Conference, September 18-21, 2023, Durban, South Africa from African Association of Agricultural Economists (AAAE)

Abstract: How do drought shocks affect sectoral rural labor allocation in the context of a least developed country? We analyze this question using five-year panel data from rural Ethiopia. We find that households respond to both short-term and persistent droughts by reallocating labor from agricultural wage jobs to non-farm self-employment. We further show that the negative effects of drought on agricultural productivity and distortive effects in local labor markets primarily drive the observed labor reallocation pattern. Lastly, we find suggestive evidence that labor reallocation to non-farm self-employment is partially welfare enhancing. This evidence broadly suggests that the changing rural employment landscape and unique structural transformation pattern in sub-Saharan Africa (SSA) can partly be attributed to the negative effects of weather shocks.

Keywords: Labor; and; Human; Capital (search for similar items in EconPapers)
Pages: 24
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaae23:365917

DOI: 10.22004/ag.econ.365917

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