Determinants of Poverty, Self-Reported Shocks, and Coping Strategies: Evidence from Rural Nepal

Abstract

This paper assesses the interrelationship between poverty, climatic and non-climatic shocks, and shock coping strategies adopted by farm-based rural households in Nepal. An analysis is based on a comprehensive data set collected from 300 randomly selected households from three purposively chosen villages of Gandaki province. The study utilizes binary and ordered probit regression models to analyze the determinants of poverty, shocks, and coping strategies. Findings reveal that the Dalit (ethnic group), large-sized, and agricultural households are more likely to be characterized as poor. The study further shows that majority of the households are exposed to the severe shock of climatic types. Patterns of shock exposure vary with the household’s characteristics. In particular, poor households in the hills primarily dependent on forest for livelihood are more likely to experience severe shocks. Further analyses indicate that the households ex-post choose dissaving, borrowing, shifting occupation, and migration to cope with severe climatic shocks. The analyses also reveal that the nature of shocks, socio-economic, demographic, geographic contexts, and factor endowments effect adopting a particular coping strategy. Findings suggest household level-specific support should be provided to mitigate the effects of shock, and appropriate measures are taken to protect their means of living.