TY - JOUR

T1 - Vulnerability to Drought and Food Price Shocks

T2 - Evidence from Ethiopia

AU - Hill, Ruth Vargas

AU - Porter, C.

N1 - This is the author’s version of a work that was accepted for publication in World Development. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in World Development, 96, 2003 DOI: 10.1016/j.worlddev.2017.02.025

PY - 2017/8/1

Y1 - 2017/8/1

N2 - While the measurement and determinants of poverty have been widely studied, vulnerability, or the threat of future poverty, has been more difficult to investigate due to data paucity. We combine nationally representative household data with objective drought and price information to quantify and investigate causes of vulnerability to poverty in Ethiopia. Previous estimates have relied on self-reported shocks and variation in outcomes within a survey, which is inadequate for shocks such as weather and prices that vary more across time than space. We used historical distributions of climate and price shocks in each district to simulate the probable distribution of future consumption for individual households and use these quantify vulnerability to poverty. We find that many Ethiopians are unable to protect their consumption against lack of rainfall and sudden increases in food prices. A moderate drought causes a 9% reduction in consumption for many rural households and recent high inflation has caused a 14% reduction in the consumption of uneducated households in urban areas. We also find that the vulnerability of rural households is considerably higher than that of urban households, despite realized poverty rates being fairly similar. This reflects the fact that the household survey in 2011 was conducted during a year of good rainfall but rapid food price inflation. The results highlight the need for caution in using a snapshot of poverty to target programs, as underlying rates of vulnerability can be quite different from the poverty rate captured at one point in time. The results also suggest that significant welfare gains can be made from risk management in both rural and urban areas. © 2017 The World Bank

AB - While the measurement and determinants of poverty have been widely studied, vulnerability, or the threat of future poverty, has been more difficult to investigate due to data paucity. We combine nationally representative household data with objective drought and price information to quantify and investigate causes of vulnerability to poverty in Ethiopia. Previous estimates have relied on self-reported shocks and variation in outcomes within a survey, which is inadequate for shocks such as weather and prices that vary more across time than space. We used historical distributions of climate and price shocks in each district to simulate the probable distribution of future consumption for individual households and use these quantify vulnerability to poverty. We find that many Ethiopians are unable to protect their consumption against lack of rainfall and sudden increases in food prices. A moderate drought causes a 9% reduction in consumption for many rural households and recent high inflation has caused a 14% reduction in the consumption of uneducated households in urban areas. We also find that the vulnerability of rural households is considerably higher than that of urban households, despite realized poverty rates being fairly similar. This reflects the fact that the household survey in 2011 was conducted during a year of good rainfall but rapid food price inflation. The results highlight the need for caution in using a snapshot of poverty to target programs, as underlying rates of vulnerability can be quite different from the poverty rate captured at one point in time. The results also suggest that significant welfare gains can be made from risk management in both rural and urban areas. © 2017 The World Bank

KW - drought

KW - Ethiopia

KW - inflation

KW - poverty

KW - vulnerability

U2 - 10.1016/j.worlddev.2017.02.025

DO - 10.1016/j.worlddev.2017.02.025

M3 - Journal article

VL - 96

SP - 65

EP - 77

JO - World Development

JF - World Development

SN - 0305-750X

ER -