Shocks, Consumption and Income Diversification in Rural Ethiopia
TL;DR: In this article, the authors present new evidence that households are unable to protect themselves from rainfall failure that occurs on average every five years in rural Ethiopia and that other less extreme rainfall variat...
Abstract: We present new evidence that households are unable to protect themselves from rainfall failure that occurs on average every five years in rural Ethiopia. However, other less extreme rainfall variat...
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TL;DR: In this article, a comprehensive review of the literature on the nature and evolution of rural livelihood diversification in sub-Saharan Africa, and the situation regarding smallholders is provided, revealing mixed findings about the causes and consequences of livelihood diversifying on rural smallholders adopting this strategy.
Abstract: This article provides a comprehensive review of the literature on the nature and evolution of rural livelihood diversification in sub-Saharan Africa, and the situation regarding smallholders. It reveals mixed findings about the causes and consequences of livelihood diversification on rural smallholders adopting this strategy. A lot of evidence from the literature suggests that it is relatively better-off smallholders with sufficient assets who achieve successful livelihood diversification, mainly by exploiting opportunities and synergies between farm and nonfarm activities. Because of asset constraints, increase in incomes and wealth based on livelihood diversification has not yet benefitted the large majority of smallholders.
254 citations
TL;DR: In this article, the authors review the recent literature across various disciplines on the effects of climate change on migration, and explore the impact of migration on migration in the context of climate adaptation.
Abstract: Migration is one response to climatic stress and shocks. In this article we review the recent literature across various disciplines on the effects of climate change on migration. We explore...
157 citations
TL;DR: In this paper, the authors studied the extent to which migration rates are constrained by liquidity constraints in rural Tanzania, and quantified the impact of weather variation on household welfare, showing how household consumption co-moves with temperature, rendering households vulnerable to local weather events.
Abstract: Large rural-urban wage gaps observed in many developing countries are suggestive of barriers to migration that keep potential migrants in rural areas. Using long panel data spanning nearly two decades, I study the extent to which migration rates are constrained by liquidity constraints in rural Tanzania. The analysis begins by quantifying the impact of weather variation on household welfare. The results show how household consumption co-moves with temperature, rendering households vulnerable to local weather events. These temperature-induced income shocks are then found to inhibit long-term migration among men, thus preventing them from tapping into the opportunities brought about by geographical mobility.
65 citations
TL;DR: In this paper, the authors combine nationally representative household data with objective drought and price information to quantify the causes of vulnerability to poverty in Ethiopia, showing that many Ethiopians are unable to protect their consumption against lack of rainfall and sudden increases in food prices.
64 citations
Cites methods from "Shocks, Consumption and Income Dive..."
...Using the Ethiopia Rural Household Survey, Porter (2012) found that more extreme shocks impact consumption to a far greater extent than lesser shocks....
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...…outcomes for households has been analyzed in this way for a small sample of villages in rural Ethiopia by amongst others Dercon and Krishnan (2000); Dercon (2004); Porter (2012), and similarly food price shocks in urban areas have been analyzed using a household panel by Alem and Söderbom (2012)....
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01 Jan 2015
TL;DR: In this article, the authors investigated the causal consequences of Tropical Storm Agatha (2010) on household welfare and revealed substantial negative effects, particularly among urban households, which led to a drop in income per capita, mostly among salaried workers.
Abstract: This paper investigates the causal consequences of Tropical Storm Agatha (2010) – the strongest tropical storm ever to strike Guatemala since rainfall records have been kept – on household welfare. The analysis reveals substantial negative effects, particularly among urban households. Per capita consumption fell by 12.6%, raising poverty by 5.5 percentage points (an increase of 18%). The negative effects of the shock span other areas of human welfare. Households cut back on food consumption (10% or 43 to 108 fewer calories per person per day) and reduced expenditures on basic durables. These effects are related to a drop in income per capita (10%), mostly among salaried workers. Adults coped with the shock by increasing their labor supply (on the intensive margin) and simultaneously relying on the labor supply of their children and withdrawing them from school. Impact heterogeneity is associated with the intensity of the shock, food price inflation, and the timing of Agatha with respect to the harvest cycle of the main crops. The results are robust to placebo treatments, household migration, issues of measurement error, and different samples. The negative effects of the storm partly explain the increase in poverty seen in urban Guatemala between 2006 and 2011, which national authorities and analysts previously attributed solely to the collateral effects of the global financial crisis.
53 citations
References
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TL;DR: In this article, the generalized method of moments (GMM) estimator optimally exploits all the linear moment restrictions that follow from the assumption of no serial correlation in the errors, in an equation which contains individual effects, lagged dependent variables and no strictly exogenous variables.
Abstract: This paper presents specification tests that are applicable after estimating a dynamic model from panel data by the generalized method of moments (GMM), and studies the practical performance of these procedures using both generated and real data. Our GMM estimator optimally exploits all the linear moment restrictions that follow from the assumption of no serial correlation in the errors, in an equation which contains individual effects, lagged dependent variables and no strictly exogenous variables. We propose a test of serial correlation based on the GMM residuals and compare this with Sargan tests of over-identifying restrictions and Hausman specification tests.
26,580 citations
"Shocks, Consumption and Income Dive..." refers methods in this paper
...We therefore present results also for the Generalised Method of Moments estimator proposed by Arellano and Bond (1991 – the A-B estimator). We also use the augmented version of the estimator developed by Arellano and Bover (1995) and Blundell and Bond (1998), known as ‘system GMM’....
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TL;DR: In this paper, two alternative linear estimators that are designed to improve the properties of the standard first-differenced GMM estimator are presented. But both estimators require restrictions on the initial conditions process.
19,132 citations
TL;DR: In this paper, a framework for efficient IV estimators of random effects models with information in levels which can accommodate predetermined variables is presented. But the authors do not consider models with predetermined variables that have constant correlation with the effects.
16,245 citations
"Shocks, Consumption and Income Dive..." refers methods in this paper
...We also use the augmented version of the estimator developed by Arellano and Bover (1995) and Blundell and Bond (1998), known as ‘system GMM’.5 Equation (2) below expands our empirical specification of the log of consumption as the dependent variable, regressed on vectors of variables that are…...
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6,503 citations
TL;DR: This pedagogic paper first introduces linear GMM, and shows how limited time span and the potential for fixed effects and endogenous regressors drive the design of the estimators of interest, offering Stata-based examples along the way.
Abstract: This working paper by CGD research fellow David Roodman provides an introduction to a particular class of econometric techniques, dynamic panel estimators. The techniques and their implementation in Stata, a statistical software package widely used in the research community, are an important input to the careful applied research CGD advocates. The techniques discussed are specifically designed to extract causal lessons from data on a large number of individuals (whether countries, firms or people) each of which is observed only a few times, such as annually over five or ten years. These techniques were developed in the 1990s by authors such as Manuel Arellano, Richard Blundell and Olympia Bover, and have been widely applied to estimate everything from the impact of foreign aid to the importance of financial sector development to the effects of AIDS deaths on households. The present paper contributes to this literature pedagogically, by providing an original synthesis and exposition of the literature on these dynamic panel estimators, and practically, by presenting the first implementation of some of these techniques in Stata. Stata is designed to encourage users to develop new commands for it, which other users can then use or even modify. In this paper Roodman introduces abar and xtabond2, which is now one of the most frequently downloaded user-written Stata commands in the world. Stata's partially open-source architecture has encouraged the growth of a vibrant world-wide community of researchers, which benefits not only from improvements made to Stata by the parent corporation, but also from the voluntary contributions of other users. Stata is arguably one of the best examples of a combination of private for-profit incentives and voluntary open-source incentives in the joint creation of a global public good.
5,458 citations
"Shocks, Consumption and Income Dive..." refers methods in this paper
...Using ‘Xtabond2’ (Roodman, 2006) in STATA we can also easily compute standard errors that are asymptotically robust to both heteroscedasticity and serial correlation, using a finite sample correction (Windmeijer, 2005)....
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...Using ‘Xtabond2’ (Roodman, 2006) in STATA we can also easily compute standard errors that are asymptotically robust to both heteroscedasticity and serial correlation, using a finite sample correction (Windmeijer, 2005)....
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