Monsoon rainfall is a key driver ofeconomic life in rural Nepal as well as a major source ofincome variability. In this paper, the authors use a newlycollected 3-year panel data set, representative of ruralNepal, merged with global monthly precipitation data toinvestigate the nature of the monsoon shock and to quantifyhousehold vulnerability to it. The authors find that theimpact of the monsoon shock is concentrated in communitieswhere water-intensive paddy dominates wet season cultivationand, coincidently, where groundwater irrigates dry seasoncultivation. In these communities, household size, areacultivated, agricultural and non-agricultural income, andhousehold per capita food consumption measured nine monthsafter the wet season harvest, all decline in response to anegative monsoon rainfall shock. A one standard deviationfall in monsoon precipitation is estimated to reduce totalincome by 3.8 percent and lead to a 0.8 percent drop in foodconsumption for the average rural household, but thesefigures rise to 11.5 percent and 3.3 percent, respectively,for households in the most paddy-intensive communities.These results have implications for social protectionpolicies, especially in the lowlands of Nepal.
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