Rainfall shocks and household welfare: Evidence from northern Ghana

Abstract

CONTEXTRainfall shocks pose a threat to farmers in rural West Africa especially in the wake of the recurrent climate variability and its impacts on agricultural production. Despite the harm they pose, limited empirical studies exist on the welfare implications of rainfall shocks on farmers' welfare in West Africa. In addition, the potential impacts of rainfall induced commodity and labor market failures have not been given much attention in the empirical literature. OBJECTIVEOur study aimed to analyze the impact of negative rainfall shocks and commodity and labor market failures on farm households' welfare in northern Ghana. Examining the impact of commodity and labor market failures amidst the experience of a negative rainfall shock helps to identify the possible entry points through which the adverse impacts of rainfall deficits may be reduced. METHODSThe study is based on a household survey data from the Africa Rising program, historical daily climate data from the CCAFS-Climate data portal and random rainfall distributions from Monte Carlo simulation. A total of 1168 households were considered in the analysis. We analyze the impact of rainfall shocks and the above-mentioned entitlement failures using a static optimization model that incorporates a crop yield response function. RESULTS AND CONCLUSIONWe found that an increase in the frequency of negative rainfall shocks under a dry future with and without entitlement failures would impact negatively on the total income and consumption levels of both the asset non-poor and asset poor households in the study area. The asset poor households would however bear the brunt of the impact, and the anticipated impact would mostly be yielded through changes in agricultural incomes and expenditure on food purchases. With increasing risk of dry rainfall conditions, total incomes of farmers could decrease by 7.3% to 45.5%. It was found that ignoring potential failures in commodity and labor markets lead to over/underestimation of the impacts of major rainfall deficits on the different types of farmers. The impact of rainfall shocks on the welfare of farmers is scenario and cluster dependent. SIGNIFICANCEThe results have significance for policy formulation and future research. The findings from this study indicate a need for targeting and acknowledgement of the differential impacts of climate shocks on the different farmer groups. Efforts made in future research to incorporate entitlement failures in climate impact studies could produce more informative guide for effective policy formulation.