Economic Impacts of Extreme Weather Events on Farm Households: Evidence from Thailand Sirikarn Lertamphainont PhD student, ACDE November 4, 2013 Crawford PhD Conference Crawford School of Public Policy, Australian National University 1

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. Introduction & Motivation Data Specification Estimation Results Conclusion Motivation 2

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

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

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

Empirical Specification-1 Q1: How do extreme rainfall conditions affect the farm households’ welfare? Introduction & Motivation Data Specification Estimation Results Conclusion 6

Q2: How do these adverse effects of rainfall shocks vary across subgroups of the sampled farm households having different endowment and livelihood? 7 Introduction & Motivation Data Specification Estimation Results Conclusion Empirical Specification-2 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: G idpt is 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

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

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

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

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

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