Blame it on the rain: Rainfall variability, consumption smoothing, and subjective well‐being in rural Ethiopia

Abstract

How does income uncertainty affect individual well-being?Combining individual-level panel data from rural Ethiopia with high-resolution meteorological data, we estimate that mean-preserving increases in rainfall variability are associated with reductions in objective consumption and subjective well-being. Mediation analysis suggests that the estimated reduction in consumption does not fully explain the total effect on individual well-being. Increased rainfall variability also has a large direct effect on individual well-being. These findings suggest that the gains from further consumption smoothing are likely greater than estimates based solely on observed consumption fluctuations.

Rainfall shocks and risk aversion: Evidence from Southeast Asia

“…Although rainfall shortages lead to significant reductions in agricultural yields and significant increases in commodity prices, the mediation analysis suggests that these market mechanisms do not play a significant role, except for a small statistically significant mediating effect of prices among the net buying household group. This finding resembles Alem and Colmer (2022), who conclude that agricultural market and income mechanisms cannot explain the impact of rainfall variability on subjective well‐being. The largely negligible role of market mechanisms in explaining the impact on risk aversion, contrary to what our simple model would predict, suggests that there are other aspects that play a role in determining the degree of risk aversion.…”

“…For example, Guiso and Paiella (2008) find that the exposure to an environment of higher income uncertainty or liquidity constraints may be associated with increases in risk aversion. A recent study by Alem and Colmer (2022) also suggests that reductions in subjective well‐being through increased levels of rainfall variability do not work through agricultural markets or income but possibly through beliefs and expectations about future states. Negative shocks may thus create a state of fear that leads to increased risk aversion (Brown et al, 2019; Cohn et al, 2015; Guiso et al, 2018; Meier, 2022).…”

How does social density influence consumer subjective well‐being under high environmental uncertainty?

“…Existing research has examined the relationship between environmental uncertainty and subjective well‐being. Uncertainty caused by natural factors (e.g., rainfall variability), environmental risks, and political violence has been found to affect how people rate their subjective well‐being (Alem & Colmer, 2022; Ayyash‐Abdo, 2010; Ojala, 2005). When it comes to the environmental uncertainty stemming from financial constraints, similar effects have been reported.…”

Statistical Modelling of Palestinian Meteorological Data Using Panel Data Techniques

“…Different authors assessed the meteorological factors that affect the amount of rainfall by using panel data techniques in different countries such as Bangladesh (Rokonuzzaman and Hossain, 2018), Ghana (Asare and Yeboah, 2022) and Ethiopia (Alem and Colmer, 2022). Allouh (2004) explored the correlation between certain atmospheric and natural variations and the annual rainfall in the West Bank, Palestine.…”