Using panel data to estimate the effect of rainfall shocks on smallholders food security and vulnerability in rural Ethiopia

Abstract

Ethiopia’s agriculture is predominantly rainfed and hence any irregularity in weather conditions has adverse welfare implications. Using panel data, this paper analyzes the effect of rainfall shocks on Ethiopian rural households’ food security and vulnerability over time while controlling for a range of other factors. To this end, we generate a time-variant household food security index which is developed by principal components analysis. Based on this index, households are classified into relative food security groups and their socioeconomic differences are assessed. The exploratory results show that compared to the less secured households, the more secured ones have male and literate household heads, tend to have a greater number of economically active household members, own more livestock, experience better rainfall outcome, and participate in local savings groups. Using the food security index as the dependent variable, we use a fixed effects instrumental variable regression model to identify determinants of households’ food security over time and find that rainfall variability is an important factor. Moreover, household size, participation in local savings groups, and livestock ownership positively affect food security. Results from multinomial logistic regression model complement the fixed effects instrumental variable regression results by showing that the level and variability of rainfall are important determinants of persistent food insecurity and vulnerability. The results highlight the need for efficient risk reduction and mitigation programs to improve risk exposure and coping ability of rural households. Careful promotion of investment in infrastructure to support irrigation and water resources development is one aspect worth considering.