|D*highlands reliable <br>D*lowlands reliable <br>D*lowlands enset|||||0.005<sup>∗∗∗</sup><br>(0.001)<br>−0.004<sup>∗∗∗</sup><br>(0.001)<br>0.004<sup>∗∗∗</sup><br>(0.001)|
|---|---|---|---|---|---|
|R‐squared|0.245|0.246|0.247|0.247|0.251|
|Adj.R‐squared|0.244|0.245|0.245|0.246|0.249|
|AIC|20047.21|20022.04|20016.28|20010.07|19937.65|
|BIC|20271.92|20270.00|20287.49|20312.27|20263.10|
|Num.obs.|17134|17134|17134|17134|17134|
|boot.cv.cropleap|0.249|0.248|0.248|0.248|0.248|
|boot.cv|0.170|0.171|0.170|0.170|0.169|
|RMSEtest05|0.0232|0.0281|0.0338|0.0272|0.0291|
|RMSEtest11|0.0438|0.0431|0.0427|0.0429|0.0490|
|RMSEtestHRE|0.0514|0.0546|0.0595|0.0602|0.0602|
|RMSEtestHDR|0.0302|0.0297|0.0519|0.0544|0.0544|
|RMSEtestLOE|0.0042|0.0060|0.0055|0.0055|0.0055|
|RMSEtestLOR|0.0602|0.0080|0.0034|0.0013|0.0013|

Notes: s.e.=standard error cv=cross validation. R2=r‐squared; AIC=Aikike information Criterion; BIC= ; boot=bootstrap; RMSE=root mean squared error. Sample size = 17238. Full results in appendix.

To explore whether the impact of drought differs across regions we created dummy variables for the four agro‐ecological zones of Ethiopia, and included these in the final regression model. Unreliable rainfall has historically underpinned much of the discussion on vulnerability in Ethiopia given the widespread predominance of livelihoods that are dependent on rainfed production systems. This characterization of vulnerability has resulted in a widespread understanding of a geographic footprint of vulnerability. Until recently the Government of Ethiopia framed rural policy discussions around “three Ethiopias”: drought‐prone highlands, moisture‐reliable highlands and pastoral lowlands. This classification was recently been expanded to a concept of “five Ethiopias” according to agricultural productivity and agroecological conditions (EDRI 2009). The five areas are drought prone highlands, moisture‐reliable cereals areas, moisture‐reliable enset areas, humid moisture‐ reliable lowlands and pastoral areas.

Pastoral areas are excluded from the analysis. In the final column of table 3.4 we show interaction terms with the regions. All three interactions are significant. With highlands drought as the baseline category, we find that the highlands reliable suffer significantly less due to drought. In fact, a test of whether the drought impact is equal to zero for the highlands reliable region cannot be rejected. The impact is also less for enset growing region, though the test of zero impact is rejected at 5%. Surprisingly, lowlands reliable is the region with the highest impact, 3% higher per 10% leap loss than the highlands drought region. This evidence does show that the relationship between drought and crop loss is different in each of the agro‐ecological zones, and we further check the models in section 4 below when we implement statistical testing.

# **Non‐linear impacts of drought**

We estimated the same model and performed statistical testing on a quadratic and cubic form to test for nonlinearity of the relationship between drought and consumption, which is plausible. The full set of results are presented in Annex 1, Table A2. The cubic model results are presented in Table A3. Adding these higher powers did not change the coefficients on the interaction terms, so we present here in figure 3.1 a graph showing the simulated shape of the curve using the squared and cubic models for ease of interpretation.

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