Rainfall shocks and agricultural productivity: Implication for rural household consumption

The paper investigates the impact of rainfall shocks on agricultural productivity and crop-specific agricultural land productivity. The paper also examines the impact of negative rainfall shocks on household consumption as well as its distributional impact by initial wealth and geographical zones. We use nationally representative panel datasets from Nigeria merged with georeferenced rainfall information. Negative rainfall shocks have heterogeneous effects on crop-specific agricultural productivity and based on geographical zones. We use an instrumental variables regression approach, where agricultural land productivity is instrumented with negative rainfall shocks. A negative rainfall shock decreases agricultural productivity and hence decreases household consumption by 37%. We also show considerable differential impacts of rainfall shocks on household consumption by initial values of wealth and geographical zones. Rainfall shocks have a negative, significant impact for asset-poor and nonpoor households, but has a higher impact on household consumption for asset-poor households. Similarly, it has higher impact for land-poor households and households in northern Nigeria.