TheEffectsofClimateandConflictShocksonHouseholdWelfare Niger YoroDialloSIP/2023/008 IMFSelectedIssuesPapersarepreparedbyIMFstaffasbackgrounddocumentationforperiodicconsultationswithmembercountries.ItisbasedontheinformationavailableatthetimeitwascompletedonDecember6,2022.ThispaperisalsopublishedseparatelyasIMFCountryReportNo2023/029. 2023 FEB INTERNATIONALMONETARYFUND2 ©2023InternationalMonetaryFundSIP/2023/008 IMFSelectedIssuesPaper AfricanDepartment TheEffectsofClimateandConflictShocksonHouseholdWelfarePreparedbyYoroDiallo AuthorizedfordistributionbyCostasChristouDecember2022 IMFSelectedIssuesPapersarepreparedbyIMFstaffasbackgrounddocumentationforperiodicconsultationswithmembercountries.ItisbasedontheinformationavailableatthetimeitwascompletedonDecember6,2022.ThispaperisalsopublishedseparatelyasIMFCountryReport No2023/029. ABSTRACT:AslivelihoodsinNigerstilldependtoalargeextentonagriculturalproduction,shocksrelatedtoclimatechangeandinsecuritypresentathreatforthecountry’sdevelopmentpathandarethemainsourcesofvulnerabilityforthepopulationinruralareas.Thispaperusesdatafromthelatesthouseholdlivingstandardsurveytoquantifytheeffectsandinteractionsoftheseshocksonhouseholdwelfarebeforeproposingpolicyrecommendationstoenhancetheresilienceofhouseholdsandtheeconomymoregenerally.Ourresultsshowthatwhenrainfalldecreasesbyonestandarddeviation,percapitaincomefallsby11percent.Furthermore,theimpactofshocksonhouseholdsdependsontheiradaptivecapacity,whichincludessufficientagriculturalcapitalandincomediversification.Withoutconcreteadaptationmeasures,vulnerabilitytoclimatechangeisexpectedtoincreaseinNiger,andhumancapitalaccumulationinpoorhouseholdisalsoexpectedtodeteriorateandcouldleadtoapovertytrap. RECOMMENDEDCITATION:Yoro,Diallo.2022.TheEffectsofClimateandConflictShocksonHouseholdWelfare.IMFSelectedIssuesPaperSIP/2023/008. JELClassificationNumbers: D12;D13;D74;Q54 Keywords: ClimateShocks;Conflicts;Welfare;Microeconometrics;Niger Author’sE-MailAddress: ydiallo2@imf.org SELECTEDISSUESPAPERS TheEffectsofClimateandConflictShocksonHouseholdWelfare Niger THEEFFECTSOFCLIMATEANDCONFLICTSHOCKSONHOUSEHOLDWELFARE1 AslivelihoodsinNigerstilldependtoalargeextentonagriculturalproduction,shocksrelatedtoclimatechangeandinsecuritypresentathreatforthecountry’sdevelopmentpathandarethemainsourcesofvulnerabilityforthepopulationinruralareas.Thispaperusesdatafromthelatesthouseholdlivingstandardsurveytoquantifytheeffectsandinteractionsoftheseshocksonhouseholdwelfarebeforeproposingpolicyrecommendationstoenhancetheresilienceofhouseholdsandtheeconomymoregenerally.Ourresultsshowthatwhenrainfalldecreasesbyonestandarddeviation,percapitaincomefallsby11percent.Furthermore,theimpactofshocksonhouseholdsdependsontheiradaptivecapacity,whichincludessufficientagriculturalcapitalandincomediversification.Withoutconcreteadaptationmeasures,vulnerabilitytoclimatechangeisexpectedtoincreaseinNiger,andhumancapitalaccumulationinpoorhouseholdisalsoexpectedtodeteriorateandcouldleadtoapovertytrap. A.Background 1.ThecoexistenceofmultipleandregularshocksconstitutesathreattothedevelopmentofNiger.Nigerisdealingwiththeconsequencesofatriplecrisis,arisingfromthecountry'slong-standingsecurityandclimatechange-relatedchallengesand,morerecently,ahealthcrisisassociatedwiththecoronavirusoutbreak(COVID-19)in2020.Shocksrelatedtoinsecurityandclimatechangeareregularanddifficulttocontain.Moreover,climatechangeandinsecurityarelinked.Climatechangecanincreasetheincidenceofconflictbetweensocio-economicgroupsbyincreasingresourcescarcityaswellascompetitionforresources. 2.Theconfluenceoftheseshocksrenderstheeradicationofpovertyextremelydifficult.DevelopmentindicatorsinNigerpointtohighpovertyandinequality,lowhumancapital(figure1),andanuntappeddemographydividend.Closeto41percentofpopulationlivesbelowthepovertylineand83percentofthepopulationislocatedinruralareas.Thepoorarenotevenlydistributedacrossregions.Only7percentofthecapital(Niamey)populationisconsideredpoor,whilemorethan45percentofDosso,Zinder,andMaradipopulationarepoor.Inequalitybetweenregionsandsocioeconomicgroupsisalsodeepenedwithlackofbasicinfrastructureinremoteareas.Thesevulnerabilitiesaredeepenedbythepersistenceofinsecurityandtheconsequencesofclimatechange. 1PreparedByYoroDiallo(AFR).CanghaoChen(AFR)andJoannaDelcambre(StaffAssistantAFRC1)assistedwiththeformattingofthechartsassistedwiththeformattingofthecharts. 4INTERNATIONALMONETARYFUND Figure1.Niger:SocioeconomicIndicators Source:WDIandIMFstaffcalculation 3.Jobopportunitiesarelimited,andagricultureremainsthemainsourceofincomeforalargesegmentofthepopulation.Niger’seconomyisnotdiversifiedanddependsprimarilyonrainfedagriculture,whichaccountsfor36.4percentofGDPin2021.Around73percentofthetotalactivepopulationisengagedintheagriculturalsector(figure2)andthesectorremainsmainlybasedonsubsistenceproduction.Themaincultivatedcrops(Rice,Millet,Maize,Sorghum)arevulnerabletoclimatechange,whichdirectlyaffectsquantitiesproducedinperiodofshocks(duringdroughts,forexample),butalsocropyieldsandlaborprodu