The Varying Income Effects of Weather Variation

Abstract

To estimate the impact of weather on
 rural income changes over time, this study combines data
 from the panel subsample of the latest Vietnam Household
 Living Standard Surveys 2010, 2012, and 2014 and gridded
 weather data from the Climate Research Unit. The analyses
 show: (i) crop cultivation, livestock management, forestry
 and fishing activities, and agricultural wages remain
 important income sources in rural Vietnam—especially for
 poorer households; (ii) rural communes are exposed to
 substantial inter- and intra-annual weather variation, as
 measured by annual, seasonal, abnormal, and extreme weather
 conditions and weather events; and (iii) these types of
 weather variation are indeed related to income variation. In
 particular, warmer temperatures and heat extremes can have
 negative income effects in all climate contexts and for all
 socioeconomic groups and most income activities. Only staple
 crops, forestry, and fishing seem to be less sensitive to
 hotter conditions. The effects of rainfall are more
 difficult to generalize. Some findings indicate that more
 rainfall is beneficial in drier places but harmful in wetter
 places. Interestingly, the incomes of poorer households seem
 to be negatively affected by wetter conditions, while those
 of wealthier households are more impacted by drier
 conditions. An increase in rainfall levels and flood
 conditions between 2012 and 2014, which were relatively wet
 years, is related to reduced income growth between these two
 years. Altogether these findings suggests that greater
 attention has to be paid to making rural livelihoods more
 resilient to weather variation which, is very likely to
 increase because of climate change.