ASARC presents The Effects of Natural Disasters on Farm Household Income and Expenditure: A Natural Experiment

Crawford School of Public Policy | Arndt-Corden Department of Economics | Australia South Asia Research Centre

Event details


Date & time

Thursday 07 February 2013


Seminar Room B, Coombs Building, Fellows Road, ANU


Dr Kh. A. Mottaleb


Raghbendra Jha
While millions of households in the world depend on rice cultivation for income and employment, volatility in rice income and negative income shocks due to crop failure stems from natural disasters, an almost regular phenomenon in rice farming in Asia and Africa. Importantly, the predicted changes in global climate are likely to increase the income volatility of rice farmers by multiplying the severity and frequency of extreme events as such cyclones, floods, and droughts in the major rice-growing areas. Income volatility, particularly negative income shocks, may force households in developing countries to lower their expenditure on health and education, as the literature suggests. Drastic reduction in education and health expenditure due to negative income shocks can affect children’s health and education, and hence human capital formation in the long run in developing countries. To ensure the long-run economic welfare of rice farmers, who are already facing high income volatility caused by natural disasters and who might face more in the future under the threat of global climate change, it is necessary to understand the magnitude of income losses and farmers’ education and other expenditures under negative income shocks, particularly in regions where natural disasters are frequent at present and may be more frequent in the near future. Using the Household Income and Expenditure Survey (HIES) data of the government of Bangladesh and applying the “difference-in-difference” estimation method in a natural experiment setting, this article reveals that income loss of rice farmers affected by a tropical cyclone that hit the coastal region in May 2009 was enormous. This article demonstrates that, compared with the unaffected rice farmers, the cyclone-affected rice farmers spent less on their children’s education. The study suggests that government and international donor agencies should make possible interventions such as strengthening loan facilities for rice farmers in disaster-prone coastal areas to enable them to continue sending their children to school.

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