Poverty and weather shocks: a panel data analysis of structural and stochastic poverty in Zambia

By Hambulo Ngoma, Brian P. Mulenga, Jason Snyder, Alefa Banda, and Antony Chapoto

While it is generally accepted that climate change will exacerbate poverty for small and medium sized farmers in Sub-Saharan Africa (SSA) over the coming years, at least due to rising variability and rainfall shocks (Mulenga, Wineman, and Sitko 2017, Hallegatte et al. 2016), a number of questions remain unanswered. Which types of the poor are more exposed to climate risk and how do the impacts of climate and weather shocks vary across stochastically and structurally poor households? Addressing these questions is crucial for improved targeting of interventions intended to build the resilience of smallholder farmers. Smallholder farmers’ reliance almost entirely on rain-fed agriculture and their limited capacity to cope with weather shocks exposes them to climate risks. Weather shocks negatively impact smallholders through their effects on agricultural productivity, which is the mainstay of rural smallholder households. If left unchecked, weather shocks can lead to increased poverty incidence and intensity. In this paper, we utilize data from a nationally representative two-wave panel of recent agricultural household surveys to conduct a high resolution analysis of the spatial distribution of poverty, and how the different types of poverty are impacted by exposure to climate change variability. The data allows us to (a) control for observed and unobserved sources of household heterogeneity, and (b) distinguish between the structurally poor, i.e., those households that have very little assets or savings, and the stochastically poor, i.e., those households that have low savings but enough assets that they could liquidate if necessary to smooth consumption during a climate shock.

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