Skip to main content Accessibility help

Vulnerability of household consumption to floods and droughts in developing countries: evidence from Pakistan

  • Takashi Kurosaki (a1)


Aggregate shocks such as droughts and floods cannot be perfectly insured by risk sharing within a village. Given this inability, what type of households are more vulnerable in terms of a decline in consumption when a village is hit by such shocks and what kind of microeconomic mechanism underlies the household heterogeneity in vulnerability? These questions are investigated using two-period panel data collected in rural Pakistan in 2001 and 2004. We compare consumption response to droughts, floods and health shocks and investigate how the response differs across different types of households. Empirical results show that the impact of droughts was negligible, younger and more landed households were less vulnerable to floods, and households with greater access to formal financial institutions were less vulnerable to idiosyncratic health shocks. The empirical pattern suggests the possibility of risk sharing among households that are heterogeneous in both risk aversion and credit access.



Hide All
Cavallo, E. and Noy, I. (2009), ‘The economics of natural disasters: a survey’, IDB Working Paper No. 124, Inter-American Development Bank, Washington, DC.
Coffman, M. and Noy, I. (2012), ‘Hurricane Iniki: measuring the long-term economic impact of a natural disaster using synthetic control’, Environment and Development Economics 17(2): 187205.
Deaton, A. (1991), ‘Saving and liquidity constraints’, Econometrica 59(5): 12211248.
Deaton, A. and Zaidi, S. (2002), ‘Guidelines for constructing consumption aggregates for welfare analysis’, LSMS Working Paper No. 135, World Bank, Washington, DC.
de Janvry, A., Fafchamps, M. and Sadoulet, E. (1991), ‘Peasant household behavior with missing markets: some paradoxes explained’, Economic Journal 101(409): 14001417.
Dercon, S. (ed.) (2005), Insurance Against Poverty, Oxford: Oxford University Press.
Dutta, I., Foster, J., and Mishra, A. (2010), ‘On measuring vulnerability to poverty’, IED Discussion Paper No. 194, Institute for Economic Development, Boston University, Boston, MA.
Fafchamps, M. (2003), Rural Poverty, Risk and Development, Cheltenham: Edward Elgar.
Glewwe, P. (1991), ‘Investigating the determinants of household welfare in Cote d'Ivoire’, Journal of Development Economics 35(2): 307337.
Government of Pakistan (various issues), Pakistan Economic Survey, Islamabad: Ministry of Finance, Government of Pakistan.
Hirashima, S. (2008), ‘The land market in development: a case study of Punjab in Pakistan and India’, Economic and Political Weekly 18 October: 4147.
Ito, T. and Kurosaki, T. (2009), ‘Weather risk, wages in kind, and the off-farm labor supply of agricultural households in a developing country’, American Journal of Agricultural Economics 91(3): 697710.
Kurosaki, T. (1998), Risk and Household Behavior in Pakistan's Agriculture, Tokyo: Institute of Developing Economies.
Kurosaki, T. (2001), ‘Consumption smoothing and the structure of risk and time preferences: theory and evidence from village India’, Hitotsubashi Journal of Economics 42(2): 103117.
Kurosaki, T. (2006), ‘Consumption vulnerability to risk in rural Pakistan’, Journal of Development Studies 42(1): 7089.
Kurosaki, T. (2013), ‘Dynamics of household assets and income shocks in the long-run process of economic development: the case of rural Pakistan’, Asian Development Review 30(2): 76109.
Kurosaki, T. and Fafchamps, M. (2002), ‘Insurance market efficiency and crop choices in Pakistan’, Journal of Development Economics 67(2): 419453.
Ligon, E. and Schechter, L. (2003), ‘Measuring vulnerability’, Economic Journal 113: C95C102.
Noy, I. (2009), ‘The macroeconomic consequences of disasters’, Journal of Development Economics 88(2): 221231.
Perera, J. (2003), Irrigation Development and Agrarian Change: A Study in Sindh, Pakistan, Jaipur: Rawat Publications.
Perrings, C. (2006), ‘Resilience and sustainable development’, Environment and Development Economics 11(4): 417427.
Sawada, Y. (2007), ‘The impact of natural and manmade disasters on household welfare’, Agricultural Economics 37(s1): 5973.
Sawada, Y., Bhattacharyay, R., and Kotera, T. (2011), ‘Aggregate impacts of natural and man-made disasters: a quantitative comparison’, RIETI Discussion Paper No. 11-E-023, Research Institute of Economy, Trade and Industry, Tokyo.
Singh, I., Squire, L., and Strauss, J. (1986), Agricultural Household Models: Extensions, Applications, and Policy, Baltimore, MD: Johns Hopkins University Press.
United Nations (2010), Pakistan Floods Emergency Response Plan, September, New York: United Nations.
Recommend this journal

Email your librarian or administrator to recommend adding this journal to your organisation's collection.

Environment and Development Economics
  • ISSN: 1355-770X
  • EISSN: 1469-4395
  • URL: /core/journals/environment-and-development-economics
Please enter your name
Please enter a valid email address
Who would you like to send this to? *


Full text views

Total number of HTML views: 0
Total number of PDF views: 0 *
Loading metrics...

Abstract views

Total abstract views: 0 *
Loading metrics...

* Views captured on Cambridge Core between <date>. This data will be updated every 24 hours.

Usage data cannot currently be displayed