Abstract
The determinants of occupational focus versus diversification between household members in rural Bangladesh are investigated as an autonomous and proactive adaptation strategy against ex ante local rainfall variability risks. Nationally representative household level survey data are combined with historical climate variability information at the Upazila level. Flood prone Upazilas are distinguished from non-flood prone Upazilas, since the latter may be susceptible to higher risks from local rainfall variability. Adult members of the same household are found to be less likely than the household head to be self-employed in agriculture in areas with high local rainfall variability. Moreover, it is shown that occupational diversification comes at a cost in terms of lower household-level welfare (consumption). The effects of three policy actions, such as access to credits, safety net, and markets are considered. Access to market appears to be more effective in reducing the likelihood of costly within household occupational diversification as an ex ante climate risk reducing strategy as compared to access to credit and safety nets.
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Notes
Households may also self-insure against weather risks by “saving for the rainy day”. However, savings for self-insurance as opposed to investment in productive capital also hinders growth.
Climate can be thought of as the expected distribution of weather. In this study we will focus on one aspect of climate variability, i.e. rainfall variability at the local and regional level. Rainfall variability is expected to increase in a warming world. Climate change is projected to increase the number of extreme temperature and rainfall events, and hence climate variability is expected to show an upward trend.
Warmer temperature in the Himalayas would not only melt the glaciers, but also would result in the upstream precipitation in the form of rain instead of snow resulting in more downstream flash floods.
Coefficient of variation is the ratio of standard deviation and mean. We also tried the mean and standard deviation as two separate indicators of rainfall parameters, and they provide similar results and are not reported.
Equation (1) is estimated using the sample of adult household members who are not the head of household.
Note, credit and safety-net is at the household level while access to market is at the Upazila level.
The nonlinear nature of the logit model precludes the calculation of the net marginal effects of rainfall variability risks and its interaction with policy action variables as the sum of the two coefficients.
Although consumption expenditures are generally viewed as a more accurate measure of welfare in developing economies for poverty and inequality analysis (e.g. Deaton 1992), it is important to bear in mind that comparisons of the level of consumption in a cross-section of households may be affected by other transitory shocks that affect flood and non-flood areas differently.
The reported models do not include regional fixed effect dummies, as flood and local rainfall variability are somewhat spatially correlated with regional dummies and the effects of these variables of our interests are absorbed into regional fixed effects.
Ideally, the potential endogeneity of OCCUju should be accounted for. We have also attempted to use the excluded local rainfall variability measure (\( RV_{u} \)) as an identifying instrument. However, due to concerns about the weakness of our instrumental variable and the bias associated with the use of a weak instrument, these results are not reported. Nevertheless, it is important to note that the instrumental variable estimate had the same positive sign as the OLS estimate reported in Table 6.
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Acknowledgments
The authors are grateful to Lalita Moorty, Nobuo Yoshida, Syud Amer Ahmed and an anonymous referee for constructive comments. The authors thank Brian Blankespoor for assistance with GIS and the market index. The findings, interpretations, and conclusions in this paper are entirely those of the authors and they do not necessarily reflect the view of the World Bank.
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Appendix
Appendix
See Tables 7, 8, 9, 10, 11, 12, 13, 14, and 15.
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Bandyopadhyay, S., Skoufias, E. Rainfall variability, occupational choice, and welfare in rural Bangladesh. Rev Econ Household 13, 589–634 (2015). https://doi.org/10.1007/s11150-013-9203-z
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DOI: https://doi.org/10.1007/s11150-013-9203-z