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Assessing the Benefits of Long-Run Weather Forecasting for the Rural Poor: Farmer Investments and Worker Migration in a Dynamic Equilibrium Model

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  • Mark R. Rosenzweig
  • Christopher R. Udry

Abstract

The livelihoods of the majority of the world's poor depend on agriculture. They face substantial risk from fluctuations in weather conditions. Better risk, credit and savings markets can improve productivity and welfare in rural areas but entail high administrative costs. We consider a classic public good with benefits that theoretically exceed those of perfect insurance contracts – improving the skill of long-run weather forecasts. We use an equilibrium model of agricultural production and labor migration, and a variety of Indian panel datasets to assess quantitatively the effects of improvements in seasonal forecasts of monsoon weather. We find that in areas where the forecast is accurate (has “skill”) that investment, migration and rural wages respond to forecasts. We calculate that if such skill were pervasive across India, the total value of an accurate forecast for farmers and wage workers is in the tens of billions of rupees.

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  • Mark R. Rosenzweig & Christopher R. Udry, 2019. "Assessing the Benefits of Long-Run Weather Forecasting for the Rural Poor: Farmer Investments and Worker Migration in a Dynamic Equilibrium Model," NBER Working Papers 25894, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:25894
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    1. Dean Karlan & Robert Osei & Isaac Osei-Akoto & Christopher Udry, 2014. "Agricultural Decisions after Relaxing Credit and Risk Constraints," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 129(2), pages 597-652.
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    8. Abhijit Banerjee & Dean Karlan & Jonathan Zinman, 2015. "Six Randomized Evaluations of Microcredit: Introduction and Further Steps," American Economic Journal: Applied Economics, American Economic Association, vol. 7(1), pages 1-21, January.
    9. Pascaline Dupas & Jonathan Robinson, 2013. "Why Don't the Poor Save More? Evidence from Health Savings Experiments," American Economic Review, American Economic Association, vol. 103(4), pages 1138-1171, June.
    10. Melanie Morten, 2019. "Temporary Migration and Endogenous Risk Sharing in Village India," Journal of Political Economy, University of Chicago Press, vol. 127(1), pages 1-46.
    11. Ingrid Nesheim & Line Barkved & Neha Bharti, 2017. "What Is the Role of Agro-Met Information Services in Farmer Decision-Making? Uptake and Decision-Making Context among Farmers within Three Case Study Villages in Maharashtra, India," Agriculture, MDPI, vol. 7(8), pages 1-16, August.
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    Cited by:

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    2. Joseph-Simon Görlach, 2023. "Borrowing Constraints and the Dynamics of Return and Repeat Migration," Journal of Labor Economics, University of Chicago Press, vol. 41(1), pages 205-243.
    3. Merfeld, Joshua D., 2020. "Smallholders, Market Failures, and Agricultural Production: Evidence from India," IZA Discussion Papers 13682, Institute of Labor Economics (IZA).
    4. Markhof,Yannick Valentin & Ponzini,Giulia & Wollburg,Philip Randolph, 2022. "Measuring Disaster Crop Production Losses Using Survey Microdata : Evidence from Sub-Saharan Africa," Policy Research Working Paper Series 9968, The World Bank.
    5. Anand, Vaibhav, 2022. "The Value of Forecast Improvements: Evidence from Advisory Lead Times and Vehicle Crashes," MPRA Paper 114491, University Library of Munich, Germany.
    6. Berazneva, Julia & Maertens, Annemie & Mhango, Wezi & Michelson, Hope, 2023. "Paying for agricultural information in Malawi: The role of soil heterogeneity," Journal of Development Economics, Elsevier, vol. 165(C).
    7. Dylan Fitz & Shyam Gouri Suresh, 2021. "Poverty traps across levels of aggregation," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 16(4), pages 909-953, October.
    8. Anand, Vaibhav, 2001. "The Value of Forecast Improvements: Evidence from Advisory Lead Times and Vehicle Crashes," SocArXiv hdpga, Center for Open Science.
    9. Merfeld, Joshua, 2021. "Misallocation and Agricultural Production: Evidence from India," 2021 Conference, August 17-31, 2021, Virtual 315914, International Association of Agricultural Economists.
    10. Merfeld, Joshua D., 2022. "Labor Elasticities, Market Failures, and Misallocation: Evidence from Indian Agriculture," 96th Annual Conference, April 4-6, 2022, K U Leuven, Belgium 321214, Agricultural Economics Society - AES.

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    JEL classification:

    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets

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