Economic Impacts of Extreme Weather Events on Farm Households: Evidence from Thailand
Sirikarn LertamphainontPhD student, ACDE
November 4, 2013 Crawford PhD Conference
Crawford School of Public Policy, Australian National University
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• The incidence of natural disasters or extreme weather events has been growing over time everywhere in the world, especially in Asia and the Pacific region.
• In a warming climate, there is convincing evidence that extreme hydro-meteorological events like floods and droughts will become more frequent and more forceful.
• Agricultural production in Thailand is dependent on natural weather conditions because of poor irrigation system.
• Very little is known about the impacts of extreme rainfall events for the case of Thailand nationwide.
• The study of the role of risk-coping mechanisms in Thailand is still limited in general.
Introduction & Motivation Data Specification Estimation Results Conclusion
Motivation
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Literature review • The existing literature
o uses subjective measures of rainfall shocks which could have endogeneity problem with measures of household income and consumption expenditure (e.g. Kurosaki, 2006, 2013; Dercon et al., 2005; Makoka, 2008)
o Applies simple rainfall anomaly to represent shocks (e.g. Asiimwe and Mpuga, 2007)
o uses only measure of household consumption expenditure to represent household welfare (e.g. Thomas et al., 2010; Skoufias et al., 2012)
o focuses on only one particular event in Thailand, the flood in 2011 (Poapongsakorn et al., 2012)
o concentrates on the effects of climate change in 4 villages of Sisaket province in Thailand (Felkner et al., 2009)
Introduction & Motivation Data Specification Estimation Results Conclusion
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Research questions
• Question#1
How do extreme rainfall conditions affect the farm households’ welfare which is measured by income and consumption expenditure?
• Question#2
How do these adverse effects of rainfall shocks vary across subgroups of the sampled farm households who are differentiated by their own endowment factors and livelihood portfolios?
Introduction & Motivation Data Specification Estimation Results Conclusion
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Data
• Household socio-economic data
Five streams of repeated cross-sectional farm household survey during 2006−2010 collected annually by the Office of Agricultural Economics (OAE)o Concentrating on the farm households who certainly
engage in agricultural production activitieso Nationwide survey throughout 76 provinces in Thailand
• Weather data
Provincial-based daily and monthly rainfall time-series collected by the Thai Meteorological Department (TMD)
Introduction & Motivation Data Specification Estimation Results Conclusion
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Equation [1] shows the average effects of exogenous rainfall shocks on household income and consumption expenditure:
• Qidpt is the level of household income or consumption expenditure per adult equivalent of household i in district d and province p at time t
• Wpt is the set of constructed provincial-based measures of rainfall shocks that occur in province p where household i lives at time t
• Hidpt is the collection of time-invariant production and household characteristics of household i in district d and province p at time t
•d represents district fixed effects
•t represents time fixed effect
•idpt is a zero mean, heteroskedasticity-corrected, i.i.d error term
' 'ln idpt pt idpt d t idptQ W β H θ
Empirical Specification-1
Q1: How do extreme rainfall conditions affect the farm households’ welfare?
Expected result: < 0 and consumption smoothing
Introduction & Motivation Data Specification Estimation Results Conclusion
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' ' 'ln ( )idpt pt idpt pt idpt d t idptQ u W H W G αφ ψ
Q2: How do these adverse effects of rainfall shocks vary across subgroups of the sampled farm households having different endowment and livelihood?
Expected result: < 0 and > 0
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Introduction & Motivation Data Specification Estimation Results Conclusion
Empirical Specification-2
Equation [2] shows the average effects of rainfall shocks on household income and consumption expenditure when accounting for the availability of risk-coping options (mainly asset/endowment-based options) and means of livelihood:
• Gidpt is the collection of household-level characteristics of household i in district d and province p at time t in representing (1) the availability of risk-coping options and (2) livelihood portfolios
Note: *, **, *** indicate statistical significance at 10%, 5% and 1%, respectively
Estimation Results: Eq. [1] 8
Introduction & Motivation Data Specification Estimation Results Conclusion
Household income:
Household consumption expenditure:
Estimation Results: Eq. [2] 9
Household income and risk-coping options:
Estimation Results: Eq. [2] 10
Household expenditure and risk-coping options:
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Household income and livelihood portfolios:
Estimation Results: Eq. [2] 11
Household expenditure and livelihood portfolios:
Conclusion
• Crop income is highly sensitive to rainfall shocks as compared with other sources of income. o Compensation from livestock and non-farm income
• Consumption smoothing is evident
• Risk-coping options that could help the farm households to smooth income and consumption: o Savings and non-farm earnings
• Wealth-differentiated farm households have access to effective risk-coping options differently.
Introduction & Motivation Data Specification Estimation Results Conclusion
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