Aggarwal, R. 2019. The impact of climate shocks on household consumption in India.
Abstract – This paper examines the impact of climate shocks, measured as temperature and precipitation variability, on monthly per capita consumption expenditure of Indian households over the 1988-2012 period, utilising data from NSSO’s Consumer Expenditure Surveys. It poses a number of research questions relating climate change and development. First, what is the relationship between higher temperature variability and household consumption in India and the key mechanisms behind potentially adverse effects of higher temperatures on consumption? While in the agriculture sector we expect reduced crop yields due to sub-optimal temperatures, does heat stress lower the productivity and therefore income of industrial workers? Further, do individuals employed in the services sector exhibit net adverse effects due to climate induced heat stress or demand more energy, in the form of investment in climate control technology, thus raising their overall household expenditures? Beyond average effects, this study will delve into distributional impacts of climate change to examine in particular, whether low income households are more vulnerable to climate shocks due to a lack of savings or infrastructural assets relative to upper income ones, and hence, the consequences of climate shocks for resulting inequality.