Gone with the Storm : Rainfall Shocks and Household Well-Being in Guatemala

This paper investigates the causal
consequences of Tropical Storm Agatha (2010) -- the
strongest tropical storm ever to strike Guatemala since
rainfall records have been kept -- on household welfare. The
analysis reveals substantial negative effects, particularly
among urban households. Per capita consumption fell by 12.6
percent, raising poverty by 5.5 percentage points (an
increase of 18 percent). The negative effects of the shock
span other areas of human welfare. Households cut back on
food consumption (10 percent or 43 to 108 fewer calories per
person per day) and reduced expenditures on basic durables.
These effects are related to a drop in income per capita (10
percent), mostly among salaried workers. Adults coped with
the shock by increasing their labor supply (on the intensive
margin) and simultaneously relying on the labor supply of
their children and withdrawing them from school. Impact
heterogeneity is associated with the intensity of the shock,
food price inflation, and the timing of Agatha with respect
to the harvest cycle of the main crops. The results are
robust to placebo treatments, household migration, issues of
measurement error, and different samples. The negative
effects of the storm partly explain the increase in poverty
seen in urban Guatemala between 2006 and 2011, which
national authorities and analysts previously attributed
solely to the collateral effects of the global financial crisis.