Distributional impact analysis of past climate variability in rural Indonesia

In rural Indonesia, around 60 percent of workers engage in agriculture and face regular climatic shocks that may threaten their crop production, household income, and human capital investments. Little is known about households’ ability to maintain consumption in response to these shocks. This paper uses both longitudinal and repeated cross-sectional data to examine the extent to which farm profits and household consumption are reduced by delayed monsoon onset, an important determinant of rice production in Indonesia. It also investigates whether poor households are more vulnerable to delayed onset. Overall, delayed onset has minor effects on rural households’ profit and consumption. For poor households, defined as those with average per capita consumption in the lowest quintile, delayed onset the previous year is associated with a 13 percent decline in per capita consumption. Most of this decline is due to an increase in household size, however, and delayed onset two years ago is positively correlated with consumption. The findings suggest that poor households experience greater volatility but no lasting reduction in consumption following delayed monsoon onset.