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

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 SirikarnLertamphainont PhD student, ACDE

2. 2 Motivation Introduction & Motivation Data Specification Estimation Results Conclusion • 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.

3. 3 Literature review Introduction & Motivation Data Specification Estimation Results Conclusion • The existing literature • uses subjectivemeasures of rainfall shocks which could haveendogeneity problem with measures of household income and consumption expenditure (e.g. Kurosaki, 2006, 2013; Derconet al., 2005; Makoka, 2008) • Applies simple rainfall anomaly to represent shocks (e.g. Asiimweand Mpuga, 2007) • uses only measure of household consumption expenditure to represent household welfare (e.g. Thomas et al., 2010; Skoufias et al., 2012) • focuses on only one particular event in Thailand, the flood in 2011 (Poapongsakorn et al., 2012) • concentrates on the effects of climate change in 4 villages of Sisaketprovince in Thailand (Felkner et al., 2009)

4. 4 Research questions Introduction & Motivation Data Specification Estimation Results Conclusion • 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?

5. 5 Data Introduction & Motivation Data Specification Estimation Results Conclusion • 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) • Concentrating on the farm households who certainly engage in agricultural production activities • Nationwide survey throughout 76 provinces in Thailand • Weather data Provincial-based daily and monthly rainfall time-series collected by the Thai Meteorological Department (TMD)

6. Q1: How do extreme rainfall conditions affect the farm households’ welfare? 6 Empirical Specification-1 Expected result: < 0 and consumption smoothing Introduction & Motivation Data Specification Estimation Results Conclusion Equation [1] shows the average effects of exogenous rainfall shocks on household income and consumption expenditure: Qidptis the level of household income or consumption expenditureper adult equivalent of household i in district d and province p at time t Wptis the set of constructed provincial-based measures of rainfall shocks that occur in province p where household i lives at time t Hidptis the collection of time-invariant production and household characteristics of household i in district d and province p at time t drepresents district fixed effects trepresents time fixed effect idptis a zero mean, heteroskedasticity-corrected, i.i.d error term

7. Q2: How do these adverse effects of rainfall shocks vary across subgroups of the sampled farm households having different endowment and livelihood? 7 Empirical Specification-2 Expected result: < 0 and > 0 Introduction & Motivation Data Specification Estimation Results Conclusion 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: Gidptis 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

8. 8 Estimation Results: Eq. [1] Household income: Household consumption expenditure: Introduction & Motivation Data Specification Estimation Results Conclusion Note: *, **, *** indicate statistical significance at 10%, 5% and 1%, respectively

9. 9 Estimation Results: Eq. [2] Household income and risk-coping options:

10. 10 Estimation Results: Eq. [2] Household expenditure and risk-coping options:

11. 11 Household income and livelihood portfolios: Estimation Results: Eq. [2] Household expenditure and livelihood portfolios:

12. 12 Conclusion Introduction & Motivation Data Specification Estimation Results Conclusion • Crop income is highly sensitive to rainfall shocks as compared with other sources of income. • 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: • Savings and non-farm earnings • Wealth-differentiated farm households have access to effective risk-coping options differently.