The effect of local climatic conditions on household consumption: a case study of South Africa

Abstract

Abstract The article explores the causal effect of local climate conditions on household consumption in South Africa. The climatic conditions are represented by monthly average temperature and precipitation. The study utilises the nationally representative 2017 National Income Dynamics Study (NIDS), wave 5 data and 2017 Climate Research Unit (CRU) climate data. The parsimonious quantile regression shows that climatic conditions (precipitation, temperature, wet days, and cloud cover) impact household per capita consumption. The quadratic quantile regression model analysis shows that household per capita consumption is convex in precipitation. Below the turning point, increased precipitation is associated with decreased household per capita consumption. Above the turning point, increased precipitation is related to increased household per capita consumption. Regions that receive very low precipitation or experience extreme temperatures (very cold or very hot) require tailor-made interventions to alleviate consumption. When we control for household characteristics, the impact of climatic conditions on household per capita consumption is weak. Providing inclusive development policies and programmes can mitigate the impact of climatic conditions on household per capita consumption.