Abstract
Extensive previous literature documents that poor households in developing countries reduce food consumption (i.e., calorie intake) in response to a major covariate shock, such as drought. We utilize rich panel data from rural Ethiopia to demonstrate that drought increases calorie consumption and reduces the diversity of households' diets. We show that a one-standard-deviation decrease in the previous year's rainfall increases per capita calorie consumption by approximately 5.5%. The key pathway through which drought affects calorie consumption is through households substituting relatively expensive food items (e.g., fruits, vegetables, and pulses) with cheaper alternatives (e.g., grains) and reallocating resources from other basic expenditures, such as health and education, to food consumption. Consistent with this mechanism, we show that a one-standard-deviation decrease in lagged rainfall reduces the household diet diversity score by about 3.1%. Heterogeneous analysis by consumption quartile suggests that households in the highest consumption quartile drive increased calorie consumption in response to drought. We find similar results for urban households who increase their calorie consumption in response to a food price shock. Our findings have important implications for weather forecasts and safety net interventions.
