Effects of weather shocks on multidimensional rural poverty: evidence for Colombia

Abstract

ABSTRACT The increasing frequency of extreme weather events related to climate change is expected to affect the agricultural sector negatively. Therefore, rural populations in developing countries, most of which lack access to risk-coping mechanisms, are likely to suffer a reduction in income, consumption, and capital accumulation, increasing rural poverty. In this study, we assess the impact of weather shocks on rural poverty using an adjusted multidimensional poverty index in a developing country highly vulnerable to climate change. We also explore the mediation effect of crop yields identified by previous literature as a potential transmission mechanism from weather shocks to poverty. Finally, we analyze a set of farming practices that may mitigate the consequences of droughts on yields. The aggregate estimations indicate that droughts increase poverty rates by 6 percentage points, whereas the excessive rainfall shock does not have a statistically significant effect. We further find that crop yields are a transmission mechanism through which droughts impact rural poverty for some crops. However, droughts’ direct effect is larger than its mediating effect through yields. Findings suggest that agricultural practices, such as using farm equipment and fertilizer, can help attenuate droughts’ negative effects on yields for plantains and cassava.