Impact of Climatic Shocks on Household Well-being: Evidence from Rural Bangladesh

Abstract

Climatic shocks often jeopardise the well-being of rural households in many developing countries like Bangladesh. Due to lack of risk-sharing arrangements or formal insurance mechanisms, life and livelihood of households living in geographically challenged areas of Bangladesh are vulnerable to such shocks. These shocks increase households’ vulnerability to poverty and reduce their prospects of coming out of poverty. It is important to have a clear understanding of the impact of such shocks on the level of well-being to design policies to protect them from negative economic impact of such shocks. How such shocks affect the welfare of households relies on their ability to cope with the shocks. Using household-level survey data collected from remote areas of Bangladesh, this study investigates the impact of climatic shocks on household well-being. The study finds that climatic shocks have a negative impact on the level of well-being measured by total consumption as well as non-food consumption expenditures. However, the impact of shocks on food consumption is rather weak. The study also documents some evidence that climatic shocks negatively impact non-food consumption of not only the poorest but also the relatively wealthier households in the rural remote locations of Bangladesh.