# **1. Introduction**

While there is a great deal of uncertainty over the exact magnitudes of the global changes in temperature and precipitation, it is widely accepted that significant deviations of the variability of climate from its historical patterns are likely to occur (IPCC, 2007).<sup>3</sup> Considering that millions of poor households in rural areas all over the world are dependent on agriculture, there are increasing concerns that the change in the patterns of climatic variability is likely to add to the already high vulnerability of households in rural areas of developing countries, thus posing a serious challenge to development efforts all over the world. In view of this impending threat of climate change upon the poor, it is critical to have a deeper understanding of the household _adaptation_ strategies and targeted measures that could mitigate the poverty impacts of erratic weather. With these considerations in mind, in this paper, we carry out an analysis of the welfare impacts of climatic variability in the rural areas of Mexico.

Our objectives are threefold. First, we try to quantify the extent to which unusual or erratic weather has any negative impacts on the welfare of households. Based on historical experience and the multiplicity of economic and institutional constraints faced, rural households in Mexico, as most rural households all over the world, have managed to develop traditional strategies for managing climatic risk. Eakin (2000), for example, documents how smallholder farmers have adapted to climatic risk in the Tlaxcala region of Mexico. Yet, quantitative evidence on how successful such risk management strategies are at protecting household welfare in Tlaxcala or elsewhere in Mexico is quite scarce.<sup>4</sup> To the extent that the current risk-coping mechanisms are not very effective in protecting welfare from erratic weather patterns one can be quite certain that the change in the patterns of climatic variability associated with climate change is likely to reduce the effectiveness of the current coping mechanisms even more and thus increase household vulnerability further. We use two separate nationally representative household surveys—the first two waves of the Mexican Family Life

> 3 According to the Intergovernmental Panel on Climate Change (IPCC) a narrow definition of climate refers to the statistical description in terms of the mean and variability of quantities such as temperature, precipitation and wind over a period of time ranging from months to thousands of years.  The norm is 30 years as defined by the World Meteorological Organization (WMO).  Climate is different from weather which refers to atmospheric conditions in a given place at a specific time.  The term ―climate change‖ is used to indicate a significant variation (in a statistical sense) in either the mean state of the climate or in its variability for an extended period of time, usually decades or longer (Wilkinson 2006).

> 4  Other studies relying on the perceptions of respondents about the incidence of different types of shocks, such as floods, droughts, freeze, fires and hurricanes include Garcia Verdu (2002), Skoufias (2007) and de la Fuente (2010). None of these earlier studies, however, make use of actual meteorological data.

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