Labor supply responses to rainfall shocks

Abstract

Agricultural production in developing countries is heavily rainfall dependent. Any unexpected variation in rainfall can affect the welfare of households. Using unit record data from India, this paper shows that households can insure against agricultural productivity (rainfall) shocks. Evidence suggests that they do so by varying the time allocation of individual members to different activities, particularly to regular wage work and human capital accumulation. There is a gender-differentiated aspect to this response. Rainfall shocks adversely affect women's human capital accumulation. While there is no evidence that households use participation in NREGS to insure against rainfall shocks, the availability of NREGS helps reduce the impact of rainfall shocks on human capital accumulation.