Agricultural Production Shocks Research Articles

Factors Affecting Crop Prices in the Context of Climate Change—A Review

Food security has become a concerning issue because of global climate change and increasing populations. Agricultural production is considered one of the key factors that affects food security. The changing climate has negatively affected agricultural production, which accelerates food shortages. The supply of agricultural commodities can be heavily influenced by climate change, which leads to climate-induced agricultural productivity shocks impacting crop prices. This paper systematically reviews publications over the past ten years on the factors affecting the prices of a wide range of crops across the globe. This review presents a critical view of these factors in the context of climate change. This paper applies a systematic approach by determining the appropriate works to review with defined inclusion criteria. From this, groups of key factors affecting crop prices are found. This study finds evidence that crop prices have been both positively and negatively affected by a range of factors such as elements of climate change, biofuel, and economic factors. However, the general trend is towards increasing crop prices due to deceasing yields over time. This is the first systematic literature review which provides a comprehensive view of the factors affecting the prices of crops across the world under climate change.

Labor supply responses to rainfall shocks

AbstractAgricultural production in developing countries is heavily rainfall dependent. Any unexpected variation in rainfall can affect the welfare of households. Using unit record data from India, this paper shows that households can insure against agricultural productivity (rainfall) shocks. Evidence suggests that they do so by varying the time allocation of individual members to different activities, particularly to regular wage work and human capital accumulation. There is a gender‐differentiated aspect to this response. Rainfall shocks adversely affect women's human capital accumulation. While there is no evidence that households use participation in NREGS to insure against rainfall shocks, the availability of NREGS helps reduce the impact of rainfall shocks on human capital accumulation.

Household Shocks and Consumption Smoothing: Evidence from Northern Bangladesh

Poor households in rural Bangladesh often face concurring idiosyncratic and aggregate shocks, which have adverse impacts on their income and consumption. In this study, we investigate the transmission channels, coping responses, and economic consequences of different shocks including idiosyncratic adverse health events and aggregate agricultural productivity shocks. We use a balanced panel data of 5,655 rural households–interviewed every year between 2010 and 2013–in northern Bangladesh. We estimate the effects of adverse health shocks on the consumption levels of poor households in a multi-shock framework. We take advantage of the panel data and use fixed effect models to control for unobserved household-level confounders and potential endogeneity. We further examine effects of shocks to agricultural wages on consumption using rainfall as an instrument. We further carry out a number of robustness checks to understand how sensitive our models are to different alternate specifications. Results indicate that households smooth their consumption after experiencing adverse health shocks, with and without the parallel incidence of other types of shocks. Consumption smoothing occurs despite households experiencing a significant decrease of wage income, which appears to be driven by an increase in informal loans from money lenders and households' social networks. To evaluate the effect of a different type of income shock on consumption, we use rainfall as an exogenous instrument for agricultural income. Results indicate that while higher rainfall leads to a significant increase in agricultural income, it does not translate to higher food expenditure for households. Together, these findings offer suggestive evidence that, in this setting, households appear to smooth food consumption in the face of income shocks. Poor households rely on formal and informal, potentially costly channels and exploit existing social networks to insure themselves against adverse shocks. The findings highlight the importance of developing a better framework to evaluate and implement more equitable social safety net policies.

Societal drought vulnerability and the Syrian climate-conflict nexus are better explained by agriculture than meteorology

Droughts are often suspected to increase the risk of violent conflict through agricultural production shocks, and existing studies often explore these links through meteorological proxies. In Syria, an alleged agricultural collapse caused by drought is assumed to have contributed to increased migration and the conflict outbreak in 2011. Here we use satellite derived cropland and climate data to study land use dynamics in relation to drought and conflict in Syria. We show that claims of an agricultural collapse cannot be substantiated as croplands saw a fast recovery after the 2007–2009 drought. Our study highlights the importance of considering land-use dynamics for understanding linkages between meteorological droughts, agricultural impacts, migration and conflict. Furthermore, our results suggest that the influential drought-migration-conflict narrative for Syria needs to be reexamined, with implications for wider discussions of how climate change might alter conflict risk.

Here Comes the Rain Again: Productivity Shocks, Educational Investments, and Child Work

In predominantly agrarian economies with limited irrigation, rainfall plays a critical role in shaping households’ incomes and subsequently their spending decisions. This study uses household-level panel data from a nationally representative survey in India to estimate the effect of agricultural productivity shocks – as proxied by exogenous annual rainfall deviations from long-term average – on education expenditures and children’s work status in rural Indian households. Our results show that a transitory increase in rainfall significantly reduces education expenditures and increases the likelihood of child labor across a range of work activities. Additionally, we show that productivity-enhancing inputs such as land ownership and credit access do not mitigate these countercyclical effects of rainfall variations, indicating the importance of market imperfections (in labor and land markets). We also find that the effects of productivity shocks are reinforced for historically marginalized castes, and moderated for more educated households. These highlight that the average effects mask considerable heterogeneity based on household and regional characteristics

Protecting girls from droughts with social safety nets

This paper revisits the relationship between agricultural productivity shocks and the infant sex ratio in India and investigates how this relationship changes when households have access to government-provided employment opportunities outside of agriculture. When a household’s preference for sons coincides with adverse agricultural productivity shocks, previous research shows that households tend to disproportionately reduce investments (prenatal and postnatal) in their female children. This behavior leads to a relatively more balanced sex ratio in good rainfall years and a more skewed sex ratio (in favor of boys) in low rainfall years. In a deviation from past work, we find evidence of this effect primarily through prenatal channels in modern India. More importantly, we show that a workfare program that decouples both wages and consumption from rainfall attenuates the relationship between rainfall and the infant sex ratio. Using a back-of-the-envelope calculation, we find that the program could have saved at least 0.7 million girls – relative to boys – if the government had implemented it from 2001 to 2005. Suggestive evidence also indicates that the program may have attenuated the positive effect of birth year productivity shocks on girls’ longer-term height-for-age.

Smallholder Farmer Engagement in Citizen Science for Varietal Diversification Enhances Adaptive Capacity and Productivity in Bihar, India

There is evidence that in many situations the use of a diverse set of two or more crop varieties in the field has benefits for production. The benefits of varietal diversification include lower crop disease incidence, higher productivity, and lower yield variability. Targeted interventions could increase varietal diversity where smallholder farmers lack the knowledge and access to seeds needed to diversify their varieties. Innovations based on crowdsourced citizen science make it possible to involve a large number of households in farmer participatory varietal selection. This study analyses varietal diversification in Bihar, India, focusing on the effects of the largest citizen science-based intervention to date, involving 25,000 farmers and 47,000 plots*seasons. The study examines if an increase in the varietal diversity of major staple crops, namely wheat and rice, under real farming conditions contributed to: (1) crop productivity and (2) the ability of households to recover from agricultural production shocks. We used the Rural Household Multi-Indicator Survey (RHoMIS) as a survey tool for rapid characterization of households and the sustainable rural livelihoods framework to understand the potential multiple interactions that are activated within the system by the intervention. We found that an increase in varietal diversification produced livelihood benefits in terms of crop productivity and the ability of households to recover from the occurrence agricultural shocks. Finally, outcomes highlight the effectiveness of development programmes aimed at strengthening rural livelihoods through participatory approaches and use of local crop varietal diversity.

Temperature, Labor Reallocation, and Industrial Production: Evidence from India

To what degree can labor reallocation mitigate the economic consequences of weather-driven agricultural productivity shocks? I estimate that temperature-driven reductions in the demand for agricultural labor in India are associated with increases in nonagricultural employment. This suggests that the ability of nonagricultural sectors to absorb workers may play a key role in attenuating the economic consequences of agricultural productivity shocks. Exploiting firm-level variation in the propensity to absorb workers, I estimate relative expansions in manufacturing output in more flexible labor markets. Estimates suggest that, in the absence of labor reallocation, local economic losses could be up to 69 percent higher. (JEL J23, J43, L60, O13, O14, Q54, Q56)

Temperature, Labor Reallocation, and Industrial Production: Evidence from India

To what degree can labor reallocation mitigate the economic consequences of weather-driven agricultural productivity shocks? I estimate that temperature-driven reductions in the demand for agricultural labor in India are associated with increases in non-agricultural employment. This suggests that the ability of non-agricultural sectors to absorb workers may play a key role in attenuating the economic consequences of agricultural productivity shocks. Exploiting firm-level variation in the propensity to absorb workers, I estimate relative expansions in manufacturing output in more flexible labor markets. Estimates suggest that, in the absence of labor reallocation, local economic losses could be up to 69% higher.

Stability of risk attitude, agricultural policies and production shocks: evidence from Italy

AbstractThis article investigates the stability of farmers’ risk attitude over time. To this end, we estimate responses to changes in agricultural policies and production shocks. We use a unique panel data of over 36,000 Italian farms specialised in cereals, during the period 1989–2009. We find evidence of risk preference changes over time in response to changes in the European Union Common Agricultural Policy and possibly after a drought-induced production shock.

Evidence of climate change impacts on crop comparative advantage and land use

AbstractRelative agricultural productivity shocks emerging from climate change will alter regional cropland use. Land allocations are sensitive to crop profits that in turn depend on yield effects induced by changes in climate and technology. We develop and apply an integrated framework to assess the impact of climate change on agricultural productivity and land use for the U.S. Northern Great Plains. Crop‐specific yield–weather models reveal crop comparative advantage due to differential yield impacts of weather across the region's major crops, that is, alfalfa, wheat, soybeans, and maize. We define crop profits as a function of the weather‐driven yields, which are then used to model land use allocation decisions. This ultimately allows us to simulate the impact of climate change under the RCP4.5 emissions scenario on land allocated to the region's major crops as well as to grass/pasture. Upon removing the trends effects in yields, climate change is projected to lower yields by 33–64% over 2031–2055 relative to 1981–2005, with soybean being the least and alfalfa the most affected crops. Yield projections applied to the land use model at present‐day input costs and output prices reveals that Dakotas’ grass acreage will increase by up to 23%, displacing croplands. Wheat acreage is expected to increase by up to 54% in select southeastern counties of North Dakota and South Dakota, where maize/soy acreage had increased by up to 58% during 1995–2016.

Realistic Specifications and Model Predictability: Testing the Performance of a Stochastic CGE Model with Regionally Correlated Yield Variability in the Wheat and Rice Sectors

Although the computable general equilibrium (CGE) model has gained immense popularity, the trustworthiness of CGE results are sometimes questioned. A number of modelers have attempted to make the models more ?realistic? by using various methods, yet the effectiveness of such modeling efforts has rarely been checked. Over the past two decades, stochastic CGE models were developed with, however, random shocks being generated following the independent and identically distributed (i.i.d.) normal distributions. In other words, correlations of agricultural productivity shocks between regions were ignored in spite of that such correlations are statistically observed in the real world. This article identifies the replicability of standard CGE models with regard to producer price volatilities of wheat and rice with regionally correlated random productivity shocks. We find that incorporating regional correlations improves predictability for wheat, while doing so for rice does not remarkably indicate amelioration, due to the limited tradability on the international rice market.

Here Comes the Rain Again: Productivity Shocks, Educational Investments and Child Work

In predominantly agrarian economies with limited irrigation, rainfall plays a critical role in shaping households' incomes and subsequently their spending decisions. This study uses household-level panel data from a nationally representative survey in India to estimate the effect of agricultural productivity shocks – as proxied by exogenous annual rainfall deviations from long-term average – on education expenditures and children's work status in rural Indian households. Our results show that a transitory increase in rainfall significantly reduces education expenditures and increases the likelihood of child labor across a range of work activities. Additionally, we show that productivity-enhancing inputs such as land ownership and credit access do not mitigate these countercyclical effects of rainfall variations, indicating the importance of market imperfections (in labor and land markets). We also find that the effects of productivity shocks are reinforced for historically marginalized castes, and moderated for more educated households. These highlight that the average effects mask considerable heterogeneity based on household and regional characteristics.

Income Shocks and Suicides: Causal Evidence From Indonesia

AbstractWe examine how income shocks affect the suicide rate in Indonesia. We use a difference-in-differences approach, exploiting the cash transfer's nationwide rollout, and corroborate the findings using a randomized experiment. Our estimates show that the cash transfers reduce the yearly suicide rate by 0.36 per 100,000 people, corresponding to an 18% decrease. Moreover, a different type of income shock, variability in agricultural productivity, also affects the suicide rate. The cash transfer program reduces the causal impact of the agricultural productivity shocks, suggesting an important role for policy interventions. Finally, we provide evidence for depression as a psychological mechanism.

Assessment of Intervention Strategies for Addressing Agricultural Production Shocks in Tanzania: The Case of Rufiji, Mbarali and Sumbawanga Districts

This study sought to gain in-depth understanding into smallholder farmers’ perceptions of intervention strategies for addressing agricultural production shocks in Tanzania. It involved identification of local policy and intervention strategies that can be used to address agricultural production shocks and build resilience among smallholder farmers in Tanzania. The study employed mixed research methodology, using primary data collected from six villages in Sumbawanga, Mbarali and Rufiji districts in Tanzania. Overall findings reveal that smallholder farmers have good knowledge of possible strategies for addressing agricultural production shocks. The farmers recommended local policy and intervention strategies for supporting them such as facilitation of access to credit and subsidies, reinforcing and strengthening informal social networks, supporting income diversification activities and introduction of crop insurance system. Other intervention strategies include introduction of participatory village land use plans, promoting information access and training to smallholder farmers and enhancing access to small-scale irrigation technologies. Based on these findings, the study recommends that policy makers and researchers should concentrate on understanding farmers’ perceptions in view of using local knowledge in the design and implementation of intervention strategies. The strength of farmers’ perceptions is that it is the outcome of farmers’ actual experience, and it is based on understanding of the local context. .The paper concludes that unless the strategies are fully implemented, agricultural production shocks will continue to affect smallholder farmers in rural Tanzania.

Risk experience and smallholder farmers’ climate change adaptation decision

ABSTRACT Farm level adaptation can offset some of the negative impacts of climate change on agriculture. Thus, it is vital to understand the process of farmers’ adaptation decisions when informing policy interventions. It is hypothesized that farmers’ decisions to take actions against climate change are related to risk experience as well as a range of socio-economic variables. Although evidence indicates that socio-economic variables are relevant, the empirical evidence on the role of risk experience on adaptation decisions is limited. The present study assesses whether perceived risk experience in terms of agricultural production shocks and yield reduction influence farmers’ decisions to adapt. Data collected from smallholder farmers in Ethiopia is used for this purpose. The study applies a multivariate endogenous probit model and controls for potential endogeneity of perceived risk experiences to adaptation decision. The results indicate that farmers who perceive having experienced production shocks are more likely to decide to adapt. However, experiencing simply yield reduction is not associated with adaptation decision. Other socio-economic, institutional, and agro-ecological variables are also found to be associated with adaptation decisions. It is concluded that the role of risk experience on farmers’ decision to adapt is a function of the severity of the experienced risk.

Measuring the impact of agricultural production shocks on international trade flows

AbstractThe purpose of this study is to measure the sensitivity of traded quantities and trade unit values to agricultural production shocks. We develop a general equilibrium model of trade in which production shocks in exporting countries affect both traded quantities and trade unit values. The model includes per-unit trade costs and develops a methodology to quantify their size exploiting the trade unit value data. Using bilateral trade flow data for a large sample of countries and agricultural commodities, we find that the intensive margin of trade is relatively inelastic to production shocks, with a 1 per cent increase in production leading to a 0.5 per cent increase in exports. We also find that per-unit trade costs are large, comprising 15–20 per cent of import unit values on average. Overall, our results suggest that there is room for improving trade as a mechanism for coping with food production volatility.

Agricultural Productivity Shocks and Poverty in India: The Short- and Long-Term Effects of Monsoon Rainfall

Agricultural Productivity Shocks and Poverty in India: The Short- and Long-Term Effects of Monsoon Rainfall

Labour Supply Responses to Rainfall Shocks

Agricultural production in developing countries is heavily rainfall dependent. Any unexpected variation in rainfall can therefore have considerable impacts on the welfare of households. Using unit record data from India, this paper shows that households respond to agricultural productivity (rainfall) shocks by varying the time allocation of individual members to different activities. There is a gender differentiated aspect to this response. We also examine the heterogeneity of effects across rain-fed and dam-fed districts. Rainfall shocks adversely affect women's opportunities for human capital accumulation and leads to considerable within household re-organization of activities, with women paying disproportionately higher costs, though primarily in rain-fed districts. Our results point to the importance of the National Rural Employment Guarantee Scheme (NREGS) and to the role of adequate infrastructure as ex-post and ex-ante mechanisms that will help dampen the impact of shocks.

Missing Girls, Income Shocks, and Consumption Smoothing

This paper revisits the relationship between agricultural productivity shocks and the infant sex ratio in India and investigates how this relationship changes when households have access to government-provided employment opportunities outside of agriculture. When a household's preference for sons coincides with adverse agricultural productivity shocks, previous research has shown households tend to disproportionately reduce investments (prenatal and postnatal) in their female children. This behavior leads to a relatively more balanced sex ratio in good rainfall years and a more skewed sex ratio (in favor of boys) in bad rainfall years. We find evidence of both prenatal and postnatal channels in India and show that a workfare program, which decouples both wages and consumption from rainfall, attenuates the relationship between rainfall and the infant sex ratio. Using a back-of-the-envelope calculation and the assumption that females should never significantly outnumber males, the program could have saved around 550 girls per district per year -- relative to boys -- if the government had implemented it in the years 2001 to 2005. Additional results on postnatal channels show substantial impacts on long-run health outcomes of surviving girls, as rainfall no longer differentially affects girls' height-for-age, relative to boys', following the implementation of the program. In an important deviation from previous research, the entirety of the relationship between the sex ratio and rainfall is apparently driven by sex-selective abortions, not infant mortality.