Weather Shocks, Coping Strategies, and Consumption Dynamics in Rural Ethiopia

Rural households adopt a broad range of strategies to cope with adverse weather shocks. Previous studies have examined the effectiveness of individual coping strategies in mitigating the impact of adverse weather shocks, but no study to date has presented a comprehensive evaluation of alternative coping strategies. We employ household panel data spanning 15 years to estimate the impact of weather shocks on consumption and poverty dynamics in rural Ethiopia, along with the effectiveness of household coping strategies in alleviating the impact of shocks. We find that rainfall increases are positively associated with per adult equivalent consumption, while high temperatures are negatively associated with consumption. In terms of household coping strategies, formal social safety net transfers mitigate the impact of adverse rainfall shocks on consumption and off-farm employment mitigates the impact of high-temperature shocks. Simulations suggest that rainfall shocks and formal social safety net transfers significantly influence household poverty dynamics. By contrast, high-temperature shocks and off-farm employment have less impact on poverty dynamics. The results highlight the need for social protection programs that support existing household coping strategies and that can rapidly respond to weather shocks.