Local droughts and income risk among Thai households

This paper investigates the extent to which households in rural Thailand across the income distribution are able to mitigate income risks in the face of shocks. It uses especially high-quality household income and consumption data spanning 64 Thai villages over 15 years. The paper identifies income shocks by village-level variations during drought conditions. It finds that richer households are better able to mitigate income risk than poorer households, in contrast to some studies of the South Asian subcontinent. These possibilities for managing income risk are shown to be correlated with the type of contract the head of household is likely to be employed in, the share of salaries in total household income, the education level of the head, the relative youth of the heads of richer households, and location effects.