Economic Impacts of Extreme Weather Events on Farm Households: Evidence from Thailand

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Economic Impacts of Extreme Weather Events on Farm Households: Evidence from Thailand

  1. 1. 1 Economic Impacts of Extreme Weather Events on Farm Households: Evidence from Thailand November 4, 2013 Crawford PhD Conference Crawford School of Public Policy, Australian National University Sirikarn Lertamphainont PhD student, ACDE
  2. 2. 2 Motivation • 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
  3. 3. 3 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
  4. 4. 4 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
  5. 5. 5 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 activities o 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
  6. 6. Q1: How do extreme rainfall conditions affect the farm households’ welfare? 6 Empirical Specification-1 Equation [1] shows the average effects of exogenous rainfall shocks on household income and consumption expenditure: ' ' ln Qidpt  Wpt β  H idpt θ   d   t   idpt • 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 • γd represents district fixed effects Expected result: 𝛃 < 0 and consumption smoothing • δt represents time fixed effect • 𝜀 idpt is a zero mean, heteroskedasticity-corrected, i.i.d error term Introduction & Motivation Data Specification Estimation Results Conclusion
  7. 7. Q2: How do these adverse effects of rainfall shocks vary across subgroups of the sampled farm households having different endowment and livelihood? 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/endowmentbased options) and means of livelihood: ' ' ln Qidpt  Wpt φ  Hidpt ψ  (Wpt  Gidpt )' α   d   t  uidpt • 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 Expected result: 𝛃 < 0 and 𝛂 > 0 Introduction & Motivation Data Specification Estimation Results Conclusion 7
  8. 8. Estimation Results: Eq. [1] 8 Household income: Household consumption expenditure: Note: *, **, *** indicate statistical significance at 10%, 5% and 1%, respectively Introduction & Motivation Data Specification Estimation Results Conclusion
  9. 9. Estimation Results: Eq. [2] Household income and risk-coping options: 9
  10. 10. Estimation Results: Eq. [2] Household expenditure and risk-coping options: 10
  11. 11. Estimation Results: Eq. [2] 11 Household income and livelihood portfolios: Household expenditure and livelihood portfolios: 11
  12. 12. 12 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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