Env. & Dev. Econ. Research SeminarWhen shocks become persistent - Household-level asset growth in the aftermath of an extreme weather eventKatharina Lehmann-Uschner
5. Februar 2020
Abstract: This article analyzes to what extent an extreme weather event can have persistent effects on household-level asset growth. Our focus is on the effect of a once-in-50-year winter disaster on post-shock livestock accumulation among pastoralists in Mongolia. Building on a novel household panel dataset, we investigate asset dynamics 2-5 years after the disaster occurred. Using a Hausman-Taylor estimator, we show that the extreme event has a significant, negative, economically large, and persistent effect on households’ asset growth rates. Households seek to mitigate the shock effect by reducing their livestock offtake. This effort is counteracted by a large, negative, and persistent shock effect on livestock fertility. In addition, the intensity of the extreme weather event is a strong predictor for abandoning the herding economy, resulting in lower overall welfare. Our findings suggest that most households are unable to fully offset the effects of the weather disaster through their own coping behavior.