Conference Agenda

This study provides new empirical insights on the distributional effects of an extreme weather event on household wealth. Our focus is on an extremely severe winter that hit Mongolia in 2009/10 and caused the death of more than 10 million livestock. The analysis builds on three waves of household panel survey data collected in the post-shock period. The identification exploits the quasi-experimental nature of the extreme event. Our analysis unravels the heterogeneity in effects across wealth groups, distinguishing between exposure, susceptibility, and coping. Results show that wealth inequality among pastoralist households increased sharply after the extreme event. Exposure to extreme weather conditions has a significant, negative, and large effect on both asset losses and post-shock wealth, while controlling for household, district, and province characteristics. The effect vanishes over time, but is still significant up to four years after the event. Pre-shock wealth does not influence losses, holding other factors constant, but households with more assets at risk experienced higher losses. Coping strategies only cushion the negative shock effects for the wealthiest households. An understanding of the distributional effects caused by extreme weather events is important for policy implementation to reduce within-country inequality.