Publication: Weather Shocks and Rural Economic Linkages: Evidence from Rajasthan’s Agricultural and Non-Agricultural Sectors
Loading...
Date
2025-03-04
ISSN
Published
2025-03-04
Editor(s)
Abstract
This study examines the complex relationships between rainfall shocks, agricultural productivity, and rural economic activity in Rajasthan, India’s largest state. Using district-level agricultural data from 1990 to 2015, enterprise surveys from 2010 to 2016, and household consumption data from 2014 to 2016, the research analyzes three key relationships. First, positive rainfall shocks increase agricultural productivity by approximately 7 percent compared to negative shocks, with irrigation infrastructure significantly moderating this effect. Second, these weather-induced agricultural productivity changes have substantial spillover effects on rural non-farm enterprises, particularly those engaged in retail trade. Specifically, positive rainfall shocks in-crease enterprise revenues by 25.7 percent and value-addition by 30.3 percent, primarily through increased local demand for non-tradable goods. Third, rural household consumption responds positively to favorable rainfall conditions, with monthly per capita expenditures increasing by 6 percent during positive rainfall shocks. This increase is predominantly driven by higher spending on luxury goods rather than essential items, supporting the demand-side channel through which weather shocks affect non-farm enterprise performance. These findings highlight the strong interconnections between agricultural conditions and non-farm economic activity in rural areas, with important implications for policies aimed at building rural economic resilience in the context of increasing weather variability.
Link to Data Set
Citation
“Darko, Francis Addeah; Dey, Akankshita; Ritadhi, S. K.. 2025. Weather Shocks and Rural Economic Linkages: Evidence from Rajasthan’s Agricultural and Non-Agricultural Sectors. Policy Research Working Paper; 11079. © World Bank. http://hdl.handle.net/10986/42906 License: CC BY 3.0 IGO.”
Associated URLs
Associated content
Other publications in this report series
Publication The Macroeconomic Implications of Climate Change Impacts and Adaptation Options(Washington, DC: World Bank, 2025-05-29)Estimating the macroeconomic implications of climate change impacts and adaptation options is a topic of intense research. This paper presents a framework in the World Bank's macrostructural model to assess climate-related damages. This approach has been used in many Country Climate and Development Reports, a World Bank diagnostic that identifies priorities to ensure continued development in spite of climate change and climate policy objectives. The methodology captures a set of impact channels through which climate change affects the economy by (1) connecting a set of biophysical models to the macroeconomic model and (2) exploring a set of development and climate scenarios. The paper summarizes the results for five countries, highlighting the sources and magnitudes of their vulnerability --- with estimated gross domestic product losses in 2050 exceeding 10 percent of gross domestic product in some countries and scenarios, although only a small set of impact channels is included. The paper also presents estimates of the macroeconomic gains from sector-level adaptation interventions, considering their upfront costs and avoided climate impacts and finding significant net gross domestic product gains from adaptation opportunities identified in the Country Climate and Development Reports. Finally, the paper discusses the limits of current modeling approaches, and their complementarity with empirical approaches based on historical data series. The integrated modeling approach proposed in this paper can inform policymakers as they make proactive decisions on climate change adaptation and resilience.Publication Global Poverty Revisited Using 2021 PPPs and New Data on Consumption(Washington, DC: World Bank, 2025-06-05)Recent improvements in survey methodologies have increased measured consumption in many low- and lower-middle-income countries that now collect a more comprehensive measure of household consumption. Faced with such methodological changes, countries have frequently revised upward their national poverty lines to make them appropriate for the new measures of consumption. This in turn affects the World Bank’s global poverty lines when they are periodically revised. The international poverty line, which is based on the typical poverty line in low-income countries, increases by around 40 percent to $3.00 when the more recent national poverty lines as well as the 2021 purchasing power parities are incorporated. The net impact of the changes in international prices, the poverty line, and new survey data (including new data for India) is an increase in global extreme poverty by some 125 million people in 2022, and a significant shift of poverty away from South Asia and toward Sub-Saharan Africa. The changes at higher poverty lines, which are more relevant to middle-income countries, are mixed.Publication Geopolitical Fragmentation and Friendshoring(Washington, DC: World Bank, 2025-06-26)This paper examines the relationship between geopolitical fragmentation and friendshoring of foreign investments over time, countries, and sectors. The analysis uses comprehensive data on foreign direct investments covering greenfield projects, mergers and acquisitions, and stocks of affiliates, as well as data on four alternative measures of geopolitical distance between countries. The gravity estimations suggest that, first, geopolitical differences have a negative effect on foreign investments and the magnitude has heightened in the post-pandemic period compared to a decade ago. Second, it is primarily the companies from advanced Western economies whose foreign investment decisions are increasingly shaped by friendshoring forces. Finally, the paper shows that friendshoring is not only confined to strategic industries, implying that allocations of foreign direct investments may not solely reflect national security or resilience considerations.Publication Soaring Food Prices Threaten Recent Economic Gains in the EU(Washington, DC: World Bank, 2025-07-02)The surge in food prices following the 2021 economic rebound has become a significant concern for households, particularly low-income ones, in Bulgaria, Croatia, Poland, and Romania. Food price inflation, which surpasses general inflation rates, risks worsening poverty and food insecurity in these countries. This paper explores the distributional impacts of rising food prices and the effectiveness of government response measures. Low-income households, who allocate a larger share of their income to food, are disproportionately affected and are struggling to cope with unexpected expenses, leading to increased difficulties in accessing proper nutrition. Simulations indicate that rising food prices contribute to higher poverty rates and greater income inequality, especially among vulnerable populations. They also suggest that the main poverty-targeted social assistance schemes offer critical support for the extreme poor, but expanding both coverage and benefits is vital to shield all at-risk individuals. Targeted policies that balance immediate relief with long-term resilience-building are essential to addressing the challenges posed by escalating food prices.Publication Disentangling the Key Economic Channels through Which Infrastructure Affects Jobs(Washington, DC: World Bank, 2025-04-03)This paper takes stock of the literature on infrastructure and jobs published since the early 2000s, using a conceptual framework to identify the key channels through which different types of infrastructure impact jobs. Where relevant, it highlights the different approaches and findings in the cases of energy, digital, and transport infrastructure. Overall, the literature review provides strong evidence of infrastructure’s positive impact on employment, particularly for women. In the case of electricity, this impact arises from freeing time that would otherwise be spent on household tasks. Similarly, digital infrastructure, particularly mobile phone coverage, has demonstrated positive labor market effects, often driven by private sector investments rather than large public expenditures, which are typically required for other large-scale infrastructure projects. The evidence on structural transformation is also positive, with some notable exceptions, such as studies that find no significant impact on structural transformation in rural India in the cases of electricity and roads. Even with better market connections, remote areas may continue to lack economic opportunities, due to the absence of agglomeration economies and complementary inputs such as human capital. Accordingly, reducing transport costs alone may not be sufficient to drive economic transformation in rural areas. The spatial dimension of transformation is particularly relevant for transport, both internationally—by enhancing trade integration—and within countries, where economic development tends to drive firms and jobs toward urban centers, benefitting from economies scale and network effects. Turning to organizational transformation, evidence on skill bias in developing countries is more mixed than in developed countries and may vary considerably by context. Further research, especially on the possible reasons explaining the differences between developed and developing economies, is needed.
Journal
Journal Volume
Journal Issue
Collections
Related items
Showing items related by metadata.
Publication Rural Non-Farm Employment in Rajasthan(Washington, DC: World Bank, 2025-03-04)This paper examines rural non-farm employment in Rajasthan, India, using multiple surveys and administrative data. The analysis covers three key aspects: individual and district-level determinants of participation in non-farm activities, the relationship between non-farm employment and household welfare, and barriers faced by rural enterprises. The findings show that secondary education strongly predicts participation in non-farm activities, particularly in skilled service sector jobs. However, women and socially marginalized groups face significant barriers in accessing non-farm employment, especially in higher-paying occupations. Households with members in regular non-farm employment, particularly in services, show significantly higher consumption levels, while casual non-farm work yields welfare levels similar to agricultural labor. Rural enterprises face multiple constraints, with lack of local demand and limited access to credit emerging as key barriers to business performance. The results suggest that although non-farm employment can substantially improve household welfare, access to better-paying opportunities remains highly unequal. Policy interventions should ad-dress both human capital development and structural barriers to create more inclusive access to non-farm employment opportunities.Publication Disquiet on the Weather Front : The Welfare Impacts of Climatic Variability in the Rural Philippines(World Bank, Washington, DC, 2013-08)Three recent rounds (2003, 2006, and 2009) of the Family Income and Expenditure Survey are matched to rainfall data from 43 rainfall stations in the Philippines to quantify the extent to which unusual weather has any negative effects on the consumption of Filipino households. It is found that negative rainfall shocks decrease consumption, in particular food consumption. Rainfall below one standard deviation of its long-run average causes food consumption to decrease by about 4 percent, when compared with rainfall within one standard deviation. Positive deviations above one standard deviation have a limited impact. Moreover, for households close to a highway or to a fixed-line phone, consumption appears to be fully protected from the impact of negative rainfall shocks.Publication Ethiopia - Diversifying the Rural Economy : An Assessment of the Investment Climate for Small and Informal Enterprises(World Bank, 2009-10-06)Ethiopia's rural non-farm sector is significant and participation is increasing. The sector is particularly important for women and poorer households. Non-farm enterprises provide income-earning opportunities to those lacking alternative options and supplementary income for farming households. This report is organized into seven chapters. The first chapter lays the analytical groundwork for assessing the rural investment climate in Ethiopia and establishes a broader context for the empirical findings. The second chapter analyzes size and basic enterprise characteristics. The third chapter sheds light on the role of women in rural entrepreneurship. The fourth chapter analyzes enterprise dynamics: start-up, closure, and growth. The fifth chapter is dedicated to the welfare effects of rural enterprises, in particular their impact on food security and distributional effects. The sixth chapter compares rural and urban informal enterprise performance and considers the role of small market towns. The final chapter summarizes the findings and offers reflections for policy.Publication Too Little Too Late : Welfare Impacts of Rainfall Shocks in Rural Indonesia(2011-03-01)The authors use regression analysis to assess the potential welfare impact of rainfall shocks in rural Indonesia. In particular, they consider two shocks: (i) a delay in the onset of monsoon and (ii) a significant shortfall in the amount of rain in the 90 day post-onset period. Focusing on households with family farm businesses, the analysis finds that a delay in the monsoon onset does not have a significant impact on the welfare of rice farmers. However, rice farm households located in areas exposed to low rainfall following the monsoon are negatively affected. Rice farm households appear to be able to protect their food expenditure in the face of weather shocks at the expense of lower nonfood expenditures per capita. The authors use propensity score matching to identify community programs that might moderate the welfare impact of this type of shock. Access to credit and public works projects in communities were among the programs with the strongest moderating effects. This is an important consideration for the design and implementation of adaptation strategies.Publication Gauging the Welfare Effects of Shocks in Rural Tanzania(World Bank, Washington, DC, 2007-11)Studies of risk and its consequences tend to focus on one risk factor, such as a drought or an economic crisis. Yet 2003 household surveys in rural Kilimanjaro and Ruvuma, two cash-crop-growing regions in Tanzania that experienced a precipitous coffee price decline around the turn of the millennium, identified health and drought shocks as well as commodity price declines as major risk factors, suggesting the need for a comprehensive approach to analyzing household vulnerability. In fact, most coffee growers, except the smaller ones in Kilimanjaro, weathered the coffee price declines rather well, at least to the point of not being worse off than non-coffee growers. Conversely, improving health conditions and reducing the effect of droughts emerge as critical to reduce vulnerability. One-third of the rural households in Kilimanjaro experienced a drought or health shocks, resulting in an estimated 8 percent welfare loss on average, after using savings and aid. Rainfall is more reliable in Ruvuma, and drought there did not affect welfare. Surprisingly, neither did health shocks, plausibly because of lower medical expenditures given limited health care provisions.
Users also downloaded
Showing related downloaded files
Publication The Evolving Geography of Productivity and Employment(Washington, DC: World Bank, 2024-01-25)The Evolving Geography of Productivity and Employment: Ideas for Inclusive Growth through a Territorial Lens in Latin America and the Caribbean employs a territorial lens to understand the persistently low economic growth rates in Latin America and the Caribbean (LAC). Using new data and methods, it shows that deindustrialization, distance, and divisions offer intertwined explanations for an urban productivity paradox in the LAC region: its highly dense cities should be among the world’s most productive, yet they are not. LAC cities have been held back by lack of dynamism, poor connectivity, and divisions into disconnected poor and affluent neighborhoods. Deindustrialization has shifted urban employment, especially in the largest LAC cities, away from manufacturing and toward less dynamic, low-productivity nontradable activities, such as retail trade and personal and other services, that profit less from agglomeration, especially in highly congested cities. Although employment in urban tradable services has risen, the increase has not been strong enough to offset the decline in manufacturing employment. Meanwhile, intercity connectivity issues have undermined the performance of the region’s network of cities by restricting market access and firms’ ability to benefit from specialization in smaller cities. Within cities, poor connectivity and residential labor market segregation have limited the gains from agglomeration to neighborhoods in central business districts where formal firms operate. Informality has persisted in low-income neighborhoods, where residents face multiple deprivations. By contrast, many agricultural and mining areas have benefited from the strong demand for commodities by China and other fast-growing economies, particularly during the Golden Decade (2003–13), leading to a decline in territorial inequality in most countries in the region. The report concludes that to encourage inclusive growth, countries must more efficiently transform natural wealth into human capital, infrastructure, and institutions and improve the competitiveness of the urban economy. It then sketches out the contours of such a development strategy, identifying policy priorities at the national, regional, and local levels.Publication Europe and Central Asia Economic Update, Spring 2025: Accelerating Growth through Entrepreneurship, Technology Adoption, and Innovation(Washington, DC: World Bank, 2025-04-23)Business dynamism and economic growth in Europe and Central Asia have weakened since the late 2000s, with productivity growth driven largely by resource reallocation between firms and sectors rather than innovation. To move up the value chain, countries need to facilitate technology adoption, stronger domestic competition, and firm-level innovation to build a more dynamic private sector. Governments should move beyond broad support for small- and medium-sized enterprises and focus on enabling the most productive firms to expand and compete globally. Strengthening competition policies, reducing the presence of state-owned enterprises, and ensuring fair market access are crucial. Limited availability of long-term financing and risk capital hinders firm growth and innovation. Economic disruptions are a shock in the short term, but they provide an opportunity for implementing enterprise and structural reforms, all of which are essential for creating better-paying jobs and helping countries in the region to achieve high-income status.Publication Classroom Assessment to Support Foundational Literacy(Washington, DC: World Bank, 2025-03-21)This document focuses primarily on how classroom assessment activities can measure students’ literacy skills as they progress along a learning trajectory towards reading fluently and with comprehension by the end of primary school grades. The document addresses considerations regarding the design and implementation of early grade reading classroom assessment, provides examples of assessment activities from a variety of countries and contexts, and discusses the importance of incorporating classroom assessment practices into teacher training and professional development opportunities for teachers. The structure of the document is as follows. The first section presents definitions and addresses basic questions on classroom assessment. Section 2 covers the intersection between assessment and early grade reading by discussing how learning assessment can measure early grade reading skills following the reading learning trajectory. Section 3 compares some of the most common early grade literacy assessment tools with respect to the early grade reading skills and developmental phases. Section 4 of the document addresses teacher training considerations in developing, scoring, and using early grade reading assessment. Additional issues in assessing reading skills in the classroom and using assessment results to improve teaching and learning are reviewed in section 5. Throughout the document, country cases are presented to demonstrate how assessment activities can be implemented in the classroom in different contexts.Publication Europe and Central Asia Economic Update, Fall 2024: Better Education for Stronger Growth(Washington, DC: World Bank, 2024-10-17)Economic growth in Europe and Central Asia (ECA) is likely to moderate from 3.5 percent in 2023 to 3.3 percent this year. This is significantly weaker than the 4.1 percent average growth in 2000-19. Growth this year is driven by expansionary fiscal policies and strong private consumption. External demand is less favorable because of weak economic expansion in major trading partners, like the European Union. Growth is likely to slow further in 2025, mostly because of the easing of expansion in the Russian Federation and Turkiye. This Europe and Central Asia Economic Update calls for a major overhaul of education systems across the region, particularly higher education, to unleash the talent needed to reinvigorate growth and boost convergence with high-income countries. Universities in the region suffer from poor management, outdated curricula, and inadequate funding and infrastructure. A mismatch between graduates' skills and the skills employers are seeking leads to wasted potential and contributes to the region's brain drain. Reversing the decline in the quality of education will require prioritizing improvements in teacher training, updated curricula, and investment in educational infrastructure. In higher education, reforms are needed to consolidate university systems, integrate them with research centers, and provide reskilling opportunities for adult workers.Publication Fixing the Foundation(Washington, DC: World Bank, 2023-09-20)Countries in middle-income East Asia and the Pacific were already experiencing serious learning deficits prior to the COVID-19 pandemic. COVID-related school disruptions have only made things worse. Learning poverty -- defined as the percentage of 10-year-olds who cannot read and understand an age-appropriate text -- is as high as 90 percent in several countries. Several large Southeast Asian countries consistently perform well below expectations on adolescent learning assessments. This report examines key factors affecting student learning in the region, with emphasis on the central role of teachers and teaching quality. It also analyzes the role education technologies, which came into widespread use during the pandemic, and examines the political economy of education reform. The report presents recommendations on how countries can strengthen teaching to improve learning and, in doing so, can enhance productivity, growth, and future development in the region.