Effects of recurrent rainfall shocks on poverty and income distribution in rural Ecuador

Abstract

Climate change is associated with an increasing frequency of extreme weather events, which can severely reduce people’s welfare, especially in the Global South. Here, we analyse the impacts of rainfall shocks – including lacking and excessive rains – on economic and social outcomes, using micro-level panel data from rural Ecuador. We employ high-resolution climate data and georeferenced household survey data covering 2013 to 2019 to examine how single and repeated rainfall shocks affect income, poverty, and income distribution. Panel data regression models with household fixed effects show that rainfall shocks reduce per capita income by 9% on average. The income losses are larger for poor than for non-poor households. Two consecutive rainfall shocks have stronger negative income effects, especially among the poor, who have limited resilience capacity and lack the resources to recover quickly. Our estimates suggest that a second rainfall shock reduces the income among the poor by more than 50%. Recurrent rainfall shocks also increase the poverty rate, the poverty gap, and poverty severity. These results highlight the need to consider social heterogeneity of climate change impacts in research and policymaking to understand and enhance people’s climate resilience.