# 1. Introduction

The impact of adverse climatic, and other, income shocks on household and individual welfare in developing countries is an issue of considerable policy interest. Understanding the magnitude and importance of income shocks in causing and perpetuating poverty is critical to designing measures aimed at building resilience, contributing towards the goal of ending poverty. A growing body of literature provides empirical evidence of the micro‐level impacts of adverse shocks in developing countries. Dercon and Krishnan (2000), Dercon (2004), and Porter (2012) find that weather shocks have a negative and long‐ lasting effect on consumption outcomes in rural Ethiopia. Hill and Porter (2016) and Makoka (2008) show that drought and price shocks reduce consumption and especially farm income, while increasing vulnerability to poverty in rural Ethiopia and Malawi, respectively. Similarly, Alem and Soderbom (2012) conclude that high food prices adversely affect households in urban Ethiopia, especially those relying on casual work and with low asset levels. Hill and Mejia‐Mantilla (2017) find negative effects of drought, conflict, and prices on poverty levels in Uganda, and Pape and Parisotto (forthcoming) find a large and significant impact of conflict on poverty in South Sudan. Hoddinott and Kinsey (2001) and Alderman et al. (2006) show the causal relation between rainfall shocks and reduced human capital formation.

This paper contributes to the existing literature, by focusing on the impact of drought on poverty in Somalia. Four consecutive seasons of poor rains between April 2016 and December 2017 resulted in a severe drought across Somalia (FEWSNET, 2018). The drought exacerbated preexisting food insecurity, as half of the population faced acute food insecurity in mid‐2017 (FEWSNET, 2016; FSNAU, 2017). The drought threatened the livelihoods of many Somalis. Lack of water and pasture led to high livestock deaths and low birth rates, and induced distress selling caused the 26 percent of Somalis relying on livestock for their livelihoods to lose between 25 and 75 percent of their herds in the first half of 2017 (FEWSNET, 2018). Households depleted productive assets and food stocks to cope with the rising food and water prices, while weak demand for labor in the agricultural sector led to lower wage levels (FEWSNET, 2017a). As a result, the drought displaced close to one million people between 2016 and 2017. Large‐scale humanitarian interventions provided critical relief to up to 3 million people to reduce the risk of famine (FEWSNET, 2017b).

Using data from two waves of the Somali High Frequency Survey (SHFS), this analysis employs a regression framework to measure the micro‐level impact of the 2016/17 drought on poverty. It exploits spatial variation in the intensity of drought that different households experienced and compares consumption before and after the drought. Households’ level of drought exposure is measured by using the Normalized Difference Vegetation Index (NDVI). The temporal difference is provided by the timing of the first two waves of the SHFS. The first wave took place before the onset of the drought in early 2016, while the second wave surveyed households in late 2017, when the drought had surpassed its peak.

The remainder of this paper is structured as follows. Section 2 describes the data used to measure the impact of drought on poverty. Section 3 outlines the identification and estimation strategy. Section 4 presents the results, and section **Error! Reference source not found.** tests the robustness of these results. Section 6 concludes with a discussion of the results and discusses policy recommendations.

# 2. Data

This analysis uses cross‐sectional household‐level data from two waves of the SHFS. Wave 1 interviewed 4,117 urban, rural, and IDP households in February and March of 2016, representative of 9 of 18 Somali pre‐war regions, excluding inaccessible areas in the south. Wave 2 expanded coverage to all but one, 2