evidence from thailand

171 Pages·2016·1.47 MB·English

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ESSAYS ON NATURAL SHOCKS,
HOUSEHOLD WELFARE, AND BEHAVIOUR:
EVIDENCE FROM THAILAND

Sirikarn Lertamphainont

A thesis submitted for the degree of Doctor of Philosophy
of the Australian National University

July 2016
DECLARATION
I hereby declare that this thesis contains no material which has been accepted for the
award of any other degree or diploma at any university or equivalent institution and that,
to the best of my knowledge and belief, this thesis contains no material previously
published or written by another person, except where due reference is made in the text of
the thesis.
This thesis contains three unpublished papers in Chapters 2 to 4. The ideas, development,
and writing of all chapters in the thesis are the principal responsibility of myself,
the candidate, working within the Arndt-Corden Department of Economics, Crawford
School of Public Policy, the ANU College of Asia and the Pacific, under the supervision
of Dr. Robert Sparrow (Chair of supervisory panel), Dr. Sommarat Chantarat (Panel
member), and Professor Peter Warr (Panel member).
The second paper in Chapter 3, entitled ‘The Effects of Natural Disasters on Households’
Preferences and Behaviour: Evidence from Thai Rice Farmers after the Mega Flood in
2011’, is co-authored with Associate Professor Krislert Samphantharak at the School of
International Relations and Pacific Studies, the University of California, San Diego and
Dr. Sommarat Chantarat, with financial support from the Economic Research Institute
for ASEAN and East Asia (ERIA). The inclusion of co-authors reflects the fact that the
work came from active collaboration between researchers. For this paper, the candidate is
the primary author and contributes greater than 50 percent of the content.

Sirikarn Lertamphainont
July 2016
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ACKNOWLEDGEMENTS
Undertaking a PhD is a long journey filled with tears and joys. Before I came to ANU in
January 2011, I thought that doing a PhD was not so difficult compared to the Master’s
Degree. But I have soon realised that it is completely different. Patience, perseverance,
and regular attention are critical elements to a successful PhD study, particularly when
studying in a foreign country when you are on your own. This thesis could not have been
completed without support and help of many people. I would like to take this opportunity
to express my sincere gratitude to all of them.
First of all, I am extremely grateful to my thesis supervisor Dr. Robert Sparrow for his
generous guidance, constant encouragement, and understanding throughout my journey.
Without his exceptional supervision, I would not be able to reach this stage of my PhD
study. I would like to thank my supervisory panel member Professor Peter Warr for his
constructive feedback and suggestions.
I am also indebted to Dr. Sommarat Chantarat, one of my supervisory panel members,
and Associate Professor Krislert Samphantharak for giving me an opportunity to conduct
a fieldwork in Thailand for our joint project, which results in Chapter 3 of this thesis.
I felt privileged to have had the chance to work with them and I am grateful for their
dedicated mentorship and advices.
I would like to express my thankfulness to other faculty members at the Arndt-Corden
Department of Economics and Crawford School of Public Policy for their stimulating
questions and insightful suggestions during my PhD seminars, which significantly help
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improve my research. I greatly appreciate all questions and comments received from
participants of the Australasian Development Economics Workshop in Perth in June
2014, the Australian Conference of Economists and Econometric Society Australasian
Meeting in Tasmania in July 2014, and the workshop on “Analysing Extreme Weather
Events from a Microeconomic Perspective” at the German Institute for Economic
Research in Berlin, Germany, in March 2015.
My special thanks also go to staffs of the Arndt-Corden Department of Economics −
Heeok Kyung and Sandra Zec − for facilitating and resolving many administrative issues,
which have made my study a smooth journey. Towards the end, I would like to thank
Cristene Carey and Ben Wilson for their assistance in copy-editing, which makes this
thesis a well-polished work.
I am deeply grateful to the Royal Thai Government for providing a scholarship for my
PhD study, which has enabled me to fulfil my dream. Without having to worry about
financial matters, I can devote full attention to my study. I wish to express my sincere
thanks to officials at the Royal Thai Embassy’s Office of Educational Affairs in Canberra,
who have provided me with prompt assistance and kind guidance.
I would like to give big thanks to my fellow PhD candidates at the Arndt-Corden
Department of Economics, including Raya, Yessi, Hemantha, Michael, Jagath, Lwin,
Manoj, Huy, and Sam, for sharing their thoughts, engaging in fruitful discussions, and
providing me with moral support during the difficult times. Particularly, I would like to
thank Mandy (my classmate and the first friend I met at ANU) for her consistent support,
positive outlook, and confidence in me. She always reassured me with her kind words
like “I have faith in you, you can do it, just keep fighting”.
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I would like to thank administrators of the University House and fellow residents in the
Garden Wing, especially for Tony, Johnny, Eleonora, David, P’Ben, P’Oe, and P’Por for
giving me ‘the second home’ that is full of friendship and care, which are particularly
important while facing stressful moments in my study. My heartfelt thanks also go to the
ANU Thai Student Association, whose activities have helped me feel closer to home with
great fun and great Thai food shared together.
I am thankful to Varang, Lara, Fifi, Muriel, Louisa, P’Noi, P’Air, and P’Hong for their
long-lasting friendship and sisterhood. I enjoyed every moment and conversation that we
shared, especially for Fifi’s social events and our sisters’ days (or nights). Their love and
support have encouraged me to struggle through difficult times.
Last but not least, I would like to express my deepest appreciation to my family for their
unconditional love and relentless support throughout this long journey. My elder brother,
Bank, has been taking good care of our parents for the past five years, which relieves my
concern and allows me to devote full concentration on my study. I would like to thank
my mother for her unwavering encouragement for me to achieve my dream and, with her
by my side, I have never felt missing anything in my life. My father has been a great
source of inspiration, who has nurtured my interest in the field of economics and has
always motivated me to pursue higher education. He never hesitates to invest in my
education and always teach me about its importance. He has told me all the time that he
has nothing else for me but education, which is the most valuable asset for one to fulfil
his or her life and achieve success.
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ABSTRACT

This thesis is motivated by the significance of natural shocks for agricultural households
in Thailand, which form the majority of the country’s poor. It contributes to the existing
literature by providing recent evidence from Thailand, where current research in this field
is limited. Three empirical studies were carried out to examine the relationships between
shocks, household welfare, and behaviour, using variations in the measures of shocks and
across different contexts.
The first study estimates the reduced-form effects of rainfall shocks on household income
and consumption expenditure, and examines how farming households respond to such
shocks. Two explicit measures of extreme rainfall events are constructed from a primary
rainfall time series in order to track the incidence of excessive and deficit rainfall on the
basis of the rainfall variability. The analysis is based on a pseudo-panel of repeated
cross-sectional household surveys conducted between 2006 and 2010, combined with
provincial-based measures of rainfall shocks. The results show evidence of consumption
smoothing but not of income smoothing in which crop income is highly sensitive to
rainfall shocks. Farming households can earn income from off-farm employment and
asset sales in compensation for crop income loss. Landless households are more affected
by rainfall shocks than better-off households. Dissaving and asset sales are prevalent
options in response to extreme rainfall events.
The second study considers a particular catastrophic event of the mega flood in 2011 and
examines its impacts on household preferences, subjective expectations, and behaviour.
This study draws on a survey that was conducted in 2014 in four key rice-growing
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provinces in Thailand’s central, lower north, and north-east regions, which were severely
affected by the flood. Experiencing the mega flood made non-flood-prone households
more risk averse, more impatient, and more altruistic. They also adjusted upward their
subjective expectations of future severe floods and public insurance, while reducing the
dependability of social networks and self-reliance. The flood influenced households’
behaviour, in that flooded households were less likely to have savings and to engage in
self-insurance mechanisms, as well as to make productive investments, but more likely to
take out crop insurance.
The third study provides a comparative analysis of multiple types of shocks by analysing
the distribution of shocks, their consequences, and how affected households cope with
different shocks. Based on a panel survey of rural and urban households from 2010 and
2012, the results show that natural and health shocks are the most common shocks and
that shocks are not uniformly distributed across households but vary according to
demographics, livelihoods, and economic status. Imperfect consumption smoothing is
evident in that households cannot fully insure their consumption against illnesses and
economic shocks. The effects of shocks on household consumption and risk-coping
responses also vary by wealth level. Shocks reduce consumption expenditure among
poorer households but lead to overspending among richer households. Asset-abundant
households are more likely to resort to their own savings or to deplete assets, while asset-
poor and resource-constrained households prefer to cut their consumption expenditure or
rely on external credit and assistance from relatives.

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TABLE OF CONTENTS

DECLARATION ............................................................................................................... i
ACKNOWLEDGEMENTS ............................................................................................. ii
ABSTRACT...................................................................................................................... iv
TABLE OF CONTENTS ............................................................................................... vii
LIST OF TABLES ........................................................................................................... ix
LIST OF FIGURES ......................................................................................................... xi
CHAPTER 1: Introduction .............................................................................................. 1
References ....................................................................................................................... 8
CHAPTER 2: ‘The Economic Impacts of Extreme Rainfall Events on Farming
Households: Evidence from Thailand’ ......................................................................... 12
2.1 Introduction ............................................................................................................. 12
2.2 Review of Related Literature .................................................................................. 16
2.3 Data ......................................................................................................................... 21
2.3.1 Socio-economic data ...................................................................................... 21
2.3.2 Constructed rainfall shock variables .............................................................. 24
2.4 Empirical Strategy................................................................................................... 29
2.5 Estimation Results................................................................................................... 32
2.5.1 Rainfall shocks and income smoothing .......................................................... 32
2.5.2 Rainfall shocks and consumption smoothing ................................................. 34
2.5.3 Rainfall shocks and coping responses ............................................................ 35
2.6 Conclusions ............................................................................................................. 36
References ..................................................................................................................... 40
Appendix 2-A: Thai Farm Household Socio-Economic Survey .................................. 51
Appendix 2-B: Rainfall Patterns in Thailand ................................................................ 53
Appendix 2-C: Sensitivity Analysis of Rainfall Shock Variables ................................ 54
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CHAPTER 3: ‘The Effects of Natural Disasters on Households’ Preferences and
Behaviour: Evidence from Thai Rice Farmers after the Mega Flood in 2011’ ........ 55
3.1 Introduction ............................................................................................................. 55
3.2 The 2011 Mega Flood in Thailand .......................................................................... 60
3.3 Data ......................................................................................................................... 62
3.3.1 Sampling strategy ........................................................................................... 62
3.3.2 Survey and outcome variables ........................................................................ 65
3.4 Empirical Strategy................................................................................................... 73
3.5 Estimation Results................................................................................................... 76
3.5.1 How did the 2011 flood affect preferences? .................................................. 76
3.5.2 How did the 2011 flood affect subjective expectations of future floods
and the dependability of safety net institutions? ............................................ 80
3.5.3 How did the 2011 flood affect household behaviour? ................................... 82
3.6 Conclusions ............................................................................................................. 85
References ..................................................................................................................... 89
Appendix 3-A: Experimental Games and Preference Measures ................................. 107
Appendix 3-B: Elicitation of Subjective Expectations ............................................... 110
CHAPTER 4: ‘Shocks, Economic Consequences, and Coping Responses:
Evidence from Thai Households’ ................................................................................ 111
4.1 Introduction ........................................................................................................... 111
4.2 Data ....................................................................................................................... 115
4.2.1 Survey data ................................................................................................... 115
4.2.2 Descriptive analysis ...................................................................................... 116
4.3 Empirical Strategy................................................................................................. 122
4.4 Estimation Results................................................................................................. 126
4.4.1 Experiencing shocks ..................................................................................... 126
4.4.2 Self-reported shocks and consumption smoothing....................................... 128
4.4.3 Self-reported shocks and coping responses .................................................. 131
4.5 Conclusions ........................................................................................................... 135
References ................................................................................................................... 139
Appendix 4-A: Test for Attrition Bias ........................................................................ 155
CHAPTER 5: Conclusions ........................................................................................... 157
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LIST OF TABLES

CHAPTER 1: Introduction
Table 1.1: Descriptive statistics of natural disasters in Thailand and Southeast Asia
during 1980-2015 ............................................................................................... 9
Table 1.2: The incidence of droughts in Thailand ............................................................ 10
Table 1.3: The incidence of floods in Thailand ................................................................ 11
CHAPTER 2: ‘The Economic Impacts of Extreme Rainfall Events on Farming
Households: Evidence from Thailand’
Table 2.1: Definition of key socio-economic variables .................................................... 45
Table 2.2: Summary statistics ........................................................................................... 46
Table 2.3: Effects of rainfall shocks on household income .............................................. 47
Table 2.4: Effects of rainfall shocks on household consumption expenditure ................. 48
Table 2.5: Effects of rainfall shocks on risk-coping responses ........................................ 49
Appendix Table 2.1: Definition of village strata .............................................................. 52
Appendix Table 2.2: Sensitively analysis of rainfall shocks on income .......................... 54
CHAPTER 3: ‘The Effects of Natural Disasters on Households’ Preferences and
Behaviour: Evidence from Thai Rice Farmers after the Mega Flood in 2011’
Table 3.1: Summary statistics of sampling and characteristics of the 2011 flood ........... 92
Table 3.2: Summary statistics of sampled households by the 2011 flood exposures ....... 93
Table 3.3: Summary statistics of preferences, subjective expectations, and behaviour
by the 2011 flood exposures ............................................................................ 95
Table 3.4: The 2011 flood and risk preferences ............................................................... 96
Table 3.5: The 2011 flood and time preferences .............................................................. 97
Table 3.6: The 2011 flood and social preferences ............................................................ 98
Table 3.7: The 2011 flood and subjective expectations of future floods ........................ 100
Table 3.8: The 2011 flood and safety net perceptions .................................................... 102
Table 3.9: The 2011 flood and household behaviour ..................................................... 104
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