Weather shocks, livelihood diversification, and household food security: Empirical evidence from rural Bangladesh

Abstract

Extreme weather events have occurred more frequently because of global climate change. For farmers, diversification, including crop and income diversification, is one of the most effective strategies to improve rural livelihoods by managing risk and coping with weather shocks. We investigate the empirical linkages among weather shocks, livelihood diversification, and household food security, exploiting three waves of nationally representative rural household panel data merged with granular weather data in Bangladesh. Using instrumental variable methods to control for the possible endogeneity of livelihood diversification decisions, we find that weather shocks are significant drivers of crop and income diversification. Moreover, both crop and income diversification are found to impact per capita food expenditure, while their effects on household dietary diversity are not robust. In particular, the distributional effects of income diversification are uniformly positive and significant for all quantiles of a per capita food expenditure distribution but are more sizable for the richest households. The findings, therefore, highlight the unequal effect of livelihood diversification within the context of rural South Asia, suggesting the need for diversification interventions targeting rural low-income groups with the goal of improving socioeconomic status, institutional conditions, and infrastructure.